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1 of Wall Street’s Favorite Stocks with Impressive Fundamentals and 2 That Underwhelm
The stocks in this article have caught Wall Street’s attention in a big way, with price targets implying returns above 20%. But investors should take these forecasts with a grain of salt because analysts typically say nice things about companies so their firms can win business in other product lines like M&A advisory.
Luckily for you, we at StockStory have no conflicts of interest - our sole job is to help you find genuinely promising companies. Keeping that in mind, here is one stock where Wall Street’s positive outlook is supported by strong fundamentals and two where consensus estimates seem disconnected from reality.
Two Stocks to Sell:
WESCO (WCC)
Consensus Price Target: $395.82 (15.7% implied return)
Based in Pittsburgh, WESCO (NYSE:WCC) provides electrical, industrial, and communications products and augments them with services such as supply chain management.
Why Are We Cautious About WCC?
- Large revenue base makes it harder to increase sales quickly, and its annual revenue growth of 6.8% over the last two years was below our standards for the industrials sector
- Competitive supply chain dynamics and steep production costs are reflected in its low gross margin of 21.5%
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 1.5% for the last five years
At $341.96 per share, WESCO trades at 19x forward P/E. Check out our free in-depth research report to learn more about why WCC doesn’t pass our bar.
Ally Financial (ALLY)
Consensus Price Target: $53.88 (23.9% implied return)
Born from the former GMAC (General Motors Acceptance Corporation) and rebranded in 2010, Ally Financial (NYSE:ALLY) operates a digital-first bank offering auto financing, insurance, mortgage lending, and investment services to consumers and commercial clients.
Why Is ALLY Risky?
- Sales trends were unexciting over the last five years as its 2.8% annual growth was below the typical financials company
- Performance over the past five years shows its incremental sales were much less profitable, as its earnings per share fell by 8.9% annually
- High net-debt-to-EBITDA ratio of 10× could force the company to raise capital on unfavorable terms if market conditions deteriorate
Ally Financial’s stock price of $43.47 implies a valuation ratio of 7.3x forward P/E. Read our free research report to see why you should think twice about including ALLY in your portfolio.
One Stock to Buy:
Construction Partners (ROAD)
Consensus Price Target: $145 (40.3% implied return)
Founded in 2001, Construction Partners (NASDAQ:ROAD) is a civil infrastructure company that builds and maintains roads, highways, and other infrastructure projects.
Why Will ROAD Outperform?
- Annual revenue growth of 39.9% over the past two years was outstanding, reflecting market share gains this cycle
- Incremental sales over the last two years have been highly profitable as its earnings per share increased by 46.7% annually, topping its revenue gains
- Free cash flow margin grew by 7.4 percentage points over the last five years, giving the company more chips to play with
Construction Partners is trading at $103.34 per share, or 32.8x forward P/E. Is now the right time to buy? See for yourself in our comprehensive research report, it’s free.
Stocks We Like Even More
WHILE YOU’RE HERE: Top 9 Market-Beating Stocks. The best stocks don’t just beat the market once. They do it again. And again. Robust revenue growth, rising free cash flow, returns on capital that leave their competition in the dust. The market has already rewarded these businesses.
But our AI platform says the party isn’t over. Find out which 9 stocks made the cut this week — FREE. Get Our Top 9 Market-Beating Stocks for Free HERE.
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+1,154% between June 2020 and June 2025). Find your next big winner with StockStory today.