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.
Whatever the consensus opinion may be, our team at StockStory cuts through the noise by conducting independent analysis to determine a company’s long-term prospects. That said, here are three stocks facing legitimate challenges and some alternatives worth exploring instead.
Benchmark (BHE)
Consensus Price Target: $78 (-8.1% implied return)
Operating as a critical behind-the-scenes partner for complex technology products since 1979, Benchmark Electronics (NYSE:BHE) provides advanced manufacturing, engineering, and technology solutions for original equipment manufacturers across aerospace, medical, industrial, and technology sectors.
Why Are We Cautious About BHE?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 2.1% annually over the last two years
- Poor free cash flow margin of 0.7% for the last five years limits its freedom to invest in growth initiatives, execute share buybacks, or pay dividends
- ROIC of 7.3% reflects management’s challenges in identifying attractive investment opportunities, and its decreasing returns suggest its historical profit centers are aging
Benchmark is trading at $84.91 per share, or 29.3x forward P/E. If you’re considering BHE for your portfolio, see our FREE research report to learn more.
RXO (RXO)
Consensus Price Target: $21.27 (-20.6% implied return)
With access to millions of trucks, RXO (NYSE:RXO) offers full-truckload, less-than-truckload, and last-mile deliveries.
Why Is RXO Risky?
- Declining unit sales over the past two years indicate demand is soft and that the company may need to revise its strategy
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
- Depletion of cash reserves could lead to a fundraising event that triggers shareholder dilution
At $26.78 per share, RXO trades at 187.6x forward P/E. Dive into our free research report to see why there are better opportunities than RXO.
CNO Financial Group (CNO)
Consensus Price Target: $49.50 (7.7% implied return)
Rebranded from Conseco in 2010 to signal a fresh start after navigating financial challenges, CNO Financial Group (NYSE:CNO) develops and markets health insurance, annuities, and life insurance products primarily targeting middle-income pre-retirees and retirees.
Why Do We Avoid CNO?
- Net premiums earned expanded by 1% annually over the last five years, falling below our expectations for the insurance sector
- Costs have risen faster than its revenue over the last five years, causing its pre-tax profit margin to decline by 8.9 percentage points
- Products and services are facing significant credit quality challenges during this cycle as book value per share has declined by 6.2% annually over the last five years
CNO Financial Group’s stock price of $45.98 implies a valuation ratio of 1.6x forward P/B. Check out our free in-depth research report to learn more about why CNO doesn’t pass our bar.
Stocks We Like More
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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today.