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華爾街日報3 of Wall Street’s Favorite Stocks We Approach with Caution
Wall Street is overwhelmingly bullish on the stocks in this article, with price targets suggesting significant upside potential. However, it’s worth remembering that analysts rarely issue sell ratings, partly because their firms often seek other business from the same companies they cover.
Unlike the investment banks, we created StockStory to provide independent analysis that helps you determine which companies are truly worth following. That said, here are three stocks where Wall Street’s estimates seem disconnected from reality and some better opportunities to consider.
DocuSign (DOCU)
Consensus Price Target: $86.50 (33.8% implied return)
Creating the digital equivalent of "sign on the dotted line" for over a billion users worldwide, DocuSign (NASDAQ:DOCU) provides an agreement management platform that enables businesses to electronically prepare, sign, and manage documents and contracts.
Why Are We Wary of DOCU?
- Customers were hesitant to make long-term commitments to its software as its 8.4% average ARR growth over the last year was sluggish
- Anticipated sales growth of 6.7% for the next year implies demand will be shaky
- Operating profits increased over the last year as the company gained some leverage on its fixed costs and became more efficient
DocuSign’s stock price of $64.65 implies a valuation ratio of 4x forward price-to-sales. Read our free research report to see why you should think twice about including DOCU in your portfolio.
Quanex (NX)
Consensus Price Target: $28 (78.1% implied return)
Starting in the seamless tube industry, Quanex (NYSE:NX) manufactures building products like window, door, kitchen, and bath cabinet components.
Why Does NX Give Us Pause?
- Efficiency has decreased over the last five years as its operating margin fell by 18.2 percentage points
- Incremental sales over the last two years were much less profitable as its earnings per share fell by 8.5% annually while its revenue grew
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
Quanex is trading at $15.73 per share, or 7.3x forward P/E. Check out our free in-depth research report to learn more about why NX doesn’t pass our bar.
First Financial Bankshares (FFIN)
Consensus Price Target: $36.40 (18.3% implied return)
With roots dating back to 1890 and a network spanning over 70 locations across the Lone Star State, First Financial Bankshares (NASDAQ:FFIN) is a Texas-focused regional bank providing commercial banking, trust services, and wealth management across numerous communities throughout the state.
Why Are We Cautious About FFIN?
- 5.8% annual revenue growth over the last five years was slower than its banking peers
- Muted 7.7% annual net interest income growth over the last five years shows its demand lagged behind its banking peers
- Earnings per share lagged its peers over the last five years as they only grew by 5.3% annually
At $30.77 per share, First Financial Bankshares trades at 2.3x forward P/B. If you’re considering FFIN for your portfolio, see our FREE research report to learn more.
Stocks We Like More
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