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.
Pitney Bowes (PBI)
Consensus Price Target: $17.14 (-5.8% implied return)
With a century-long history dating back to 1920 and processing over 15 billion pieces of mail annually, Pitney Bowes (NYSE:PBI) provides shipping, mailing technology, logistics, and financial services to businesses of all sizes.
Why Is PBI Not Exciting?
- Annual sales declines of 12.6% for the past five years show its products and services struggled to connect with the market during this cycle
- Sales are expected to decline once again over the next 12 months as it continues working through a challenging demand environment
Pitney Bowes’s stock price of $18.20 implies a valuation ratio of 10.8x forward P/E. Read our free research report to see why you should think twice about including PBI in your portfolio.
C.H. Robinson Worldwide (CHRW)
Consensus Price Target: $197.75 (2.2% implied return)
Engaging in contracts with tens of thousands of transportation companies, C.H. Robinson (NASDAQ:CHRW) offers freight transportation and logistics services.
Why Does CHRW Worry Us?
- Annual sales declines of 1.2% for the past five years show its products and services struggled to connect with the market during this cycle
- Competitive supply chain dynamics and steep production costs are reflected in its low gross margin of 7.5%
- Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability
C.H. Robinson Worldwide is trading at $193.50 per share, or 30x forward P/E. Check out our free in-depth research report to learn more about why CHRW doesn’t pass our bar.
American Financial Group (AFG)
Consensus Price Target: $147.17 (4.1% implied return)
With roots dating back to 1872 and a business model that empowers local decision-making, American Financial Group (NYSE:AFG) is an insurance holding company that specializes in commercial property and casualty insurance products for businesses through its Great American Insurance Group.
Why Should You Sell AFG?
- 3.2% annualized net premiums earned growth over the last two years lagged behind its insurance peers
- Earnings growth underperformed the sector average over the last two years as its EPS grew by just 2.5% annually
- Policy losses and capital returns have eroded its book value per share this cycle as its book value per share declined by 6.4% annually over the last five years
At $141.34 per share, American Financial Group trades at 2.3x forward P/B. To fully understand why you should be careful with AFG, check out our full research report (it’s free).
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