When Wall Street turns bearish on a stock, it’s worth paying attention. These calls stand out because analysts rarely issue grim ratings on companies for fear their firms will lose out in other business lines such as M&A advisory.
At StockStory, we look beyond the headlines with our independent analysis to determine whether these bearish calls are justified. That said, here are three stocks where the outlook is warranted and some alternatives with better fundamentals.
Saia (SAIA)
Consensus Price Target: $440.95 (-0.2% implied return)
Pivoting its business model after realizing there was more success in delivering produce than selling it, Saia (NASDAQ:SAIA) is a provider of freight transportation solutions.
Why Are We Cautious About SAIA?
- Disappointing tons shipped over the past two years show it’s struggled to increase its sales volumes and had to rely on price increases
- Low free cash flow margin of -0.2% for the last five years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
- Eroding returns on capital suggest its historical profit centers are aging
Saia’s stock price of $441.62 implies a valuation ratio of 36.8x forward P/E. Check out our free in-depth research report to learn more about why SAIA doesn’t pass our bar.
Morgan Stanley (MS)
Consensus Price Target: $200.19 (5.5% implied return)
Founded in 1924 during the post-WWI economic boom by former JP Morgan partners, Morgan Stanley (NYSE:MS) is a global financial services firm that provides investment banking, wealth management, and investment management services to corporations, governments, institutions, and individuals.
Why Does MS Give Us Pause?
- Annual sales growth of 6.1% over the last five years lagged behind its financials peers as its large revenue base made it difficult to generate incremental demand
- Earnings per share lagged its peers over the last five years as they only grew by 7.3% annually
- Sizable asset base leads to capital growth challenges as its 5.1% annual tangible book value per share increases over the last five years fell short of other financials companies
At $189.82 per share, Morgan Stanley trades at 16.1x forward P/E. Read our free research report to see why you should think twice about including MS in your portfolio.
Hilltop Holdings (HTH)
Consensus Price Target: $39.67 (4.2% implied return)
Transformed from a residential communities business to a financial services powerhouse in 2007, Hilltop Holdings (NYSE:HTH) is a Texas-based financial holding company that provides banking, broker-dealer, and mortgage origination services.
Why Should You Sell HTH?
- Net interest income trends were unexciting over the last five years as its 1.3% annual growth was below the typical banking firm
- Overall productivity is expected to decrease over the next year as Wall Street thinks its efficiency ratio will degrade by 29.9 percentage points
- Sales were less profitable over the last five years as its earnings per share fell by 14.8% annually, worse than its revenue declines
Hilltop Holdings is trading at $38.08 per share, or 1x forward P/B. If you’re considering HTH for your portfolio, see our FREE research report to learn more.
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