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3 of Wall Street’s Favorite Stocks with Questionable Fundamentals
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. That said, here are three stocks where Wall Street’s enthusiasm may be misplaced and some other investments worth exploring instead.
Power Integrations (POWI)
Consensus Price Target: $77.50 (52.6% implied return)
A leading supplier of parts for electronics such as home appliances, Power Integrations (NASDAQ:POWI) is a semiconductor designer and developer specializing in products used for high-voltage power conversion.
Why Do We Avoid POWI?
- Sales tumbled by 6.4% annually over the last five years, showing market trends are working against it during this cycle
- Overall productivity fell over the last five years as its plummeting sales were accompanied by a decline in its operating margin
- Sales were less profitable over the last five years as its earnings per share fell by 14.1% annually, worse than its revenue declines
At $50.78 per share, Power Integrations trades at 30.5x forward P/E. Read our free research report to see why you should think twice about including POWI in your portfolio.
Carriage Services (CSV)
Consensus Price Target: $51.80 (62% implied return)
Established in 1991, Carriage Services (NYSE:CSV) is a provider of funeral and cemetery services in the United States.
Why Do We Steer Clear of CSV?
- 3% annual revenue growth over the last five years was slower than its consumer discretionary peers
- Low free cash flow margin of 10.5% for the last two years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
- Stagnant returns on capital show management has failed to improve the company’s business quality
Carriage Services’s stock price of $31.98 implies a valuation ratio of 9.1x forward P/E. To fully understand why you should be careful with CSV, check out our full research report (it’s free).
Excelerate Energy (EE)
Consensus Price Target: $43.46 (29.4% implied return)
Operating specialized vessels that can deliver up to 1.2 billion cubic feet of natural gas per day, Excelerate Energy (NYSE:EE) provides liquified natural gas regasification services using floating vessels that convert LNG back into natural gas.
Why Are We Hesitant About EE?
- Smaller revenue base of $1.47 billion means it hasn’t achieved the economies of scale that some industry juggernauts enjoy
- High extraction costs and unfavorable asset economics are reflected in its low gross margin of 29.9%
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 5.5% for the last five years
Excelerate Energy is trading at $33.60 per share, or 17.4x forward P/E. If you’re considering EE for your portfolio, see our FREE research report to learn more.
High-Quality Stocks for All Market Conditions
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-micro-cap company Tecnoglass (+1,552% between June 2020 and June 2025). Find your next big winner with StockStory today.