Wall Street’s bearish price targets for the stocks in this article signal serious concerns. Such forecasts are uncommon in an industry where maintaining cordial corporate relationships often trumps delivering the hard truth.
Accurately determining a company’s long-term prospects isn’t easy, especially when sentiment is weak. That’s where StockStory comes in - to help you find attractive investment candidates backed by unbiased research. That said, here is one stock where you should be greedy instead of fearful and two where the outlook is warranted.
Two Stocks to Sell:
IDEX (IEX)
Consensus Price Target: $238.29 (4.9% implied return)
Founded in 1988, IDEX (NYSE: IEX) is a global manufacturer specializing in highly engineered products such as pumps, flow meters, and fluidics systems for various industries.
Why Are We Hesitant About IEX?
- Absence of organic revenue growth over the past two years suggests it may have to lean into acquisitions to drive its expansion
- Earnings growth over the last two years fell short of the peer group average as its EPS only increased by 1.2% annually
- Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability
IDEX is trading at $227.19 per share, or 26.3x forward P/E. To fully understand why you should be careful with IEX, check out our full research report (it’s free).
First Bancorp (FBNC)
Consensus Price Target: $66.35 (4.4% implied return)
Founded during the Great Depression in 1934 and originally known as Montgomery Bancorp, First Bancorp (NASDAQ: FBNC) is a community-oriented commercial bank providing a wide range of financial services to businesses and individuals in North and South Carolina.
Why Does FBNC Give Us Pause?
- Muted 2% annual revenue growth over the last two years shows its demand lagged behind its banking peers
- Estimated net interest income growth of 4.4% for the next 12 months implies demand will slow from its five-year trend
- Incremental sales over the last two years were less profitable as its earnings per share were flat while its revenue grew
At $63.55 per share, First Bancorp trades at 1.6x forward P/B. Read our free research report to see why you should think twice about including FBNC in your portfolio.
One Stock to Watch:
Douglas Dynamics (PLOW)
Consensus Price Target: $56.25 (4.4% implied return)
Once manufacturing snowplows designed for the iconic jeep vehicle precursor, Douglas Dynamics (NYSE: PLOW) offers snow and ice equipment for the roads and sidewalks.
Why Does PLOW Stand Out?
- Demand will likely accelerate over the next 12 months as its forecasted revenue growth of 13.1% is above its two-year trend
- Performance over the past two years shows its incremental sales were extremely profitable, as its annual earnings per share growth of 41.4% outpaced its revenue gains
- Free cash flow margin jumped by 9.4 percentage points over the last five years, giving the company more resources to pursue growth initiatives, repurchase shares, or pay dividends
Douglas Dynamics’s stock price of $53.89 implies a valuation ratio of 19.6x forward P/E. Is now the right time to buy? See for yourself in our in-depth research report, it’s free.
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