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 is one stock where Wall Street’s pessimism is creating a buying opportunity and two facing legitimate challenges.
Two Stocks to Sell:
Graham Corporation (GHM)
Consensus Price Target: $69.25 (-5.9% implied return)
Founded when its founder patented a unique design for a vacuum system used in the sugar refining process, Graham (NYSE: GHM) provides vacuum and heat transfer equipment for the energy, petrochemical, refining, and chemical sectors.
Why Are We Hesitant About GHM?
- Poor expense management has led to an operating margin of 2.3% that is below the industry average
- Underwhelming 3.1% return on capital reflects management’s difficulties in finding profitable growth opportunities
- Limited cash reserves may force the company to seek unfavorable financing terms that could dilute shareholders
At $73.61 per share, Graham Corporation trades at 49.4x forward P/E. Check out our free in-depth research report to learn more about why GHM doesn’t pass our bar.
Bunge Global (BG)
Consensus Price Target: $110.10 (1.6% implied return)
With origins dating back to 1818 and operations spanning both hemispheres to balance seasonal harvests, Bunge Global (NYSE: BG) is an agribusiness and food company that processes oilseeds, grains, and other agricultural commodities into vegetable oils, protein meals, flours, and specialty ingredients.
Why Does BG Worry Us?
- Products have few die-hard fans as sales have declined by 3.7% annually over the last three years
- Sales were less profitable over the last three years as its earnings per share fell by 19% annually, worse than its revenue declines
- Depletion of cash reserves could lead to a fundraising event that triggers shareholder dilution
Bunge Global’s stock price of $108.37 implies a valuation ratio of 13.2x forward P/E. If you’re considering BG for your portfolio, see our FREE research report to learn more.
One Stock to Buy:
Astronics (ATRO)
Consensus Price Target: $67.58 (-7% implied return)
Integrating power outlets into many Boeing aircraft, Astronics (NASDAQ: ATRO) is a provider of technologies and services to the global aerospace, defense, and electronics industries.
Why Are We Backing ATRO?
- Impressive 12.9% annual revenue growth over the last two years indicates it’s winning market share this cycle
- Free cash flow margin jumped by 10.4 percentage points over the last five years, giving the company more resources to pursue growth initiatives, repurchase shares, or pay dividends
- Returns on capital are increasing as management’s prior bets are starting to bear fruit
Astronics is trading at $72.70 per share, or 30.1x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
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