Wall Street’s bearish price targets for the stocks in this article signal serious concerns. Such forecasts are uncommon in an industry where maintaining cordial corporate relationships often trumps delivering the hard truth.
Accurately determining a company’s long-term prospects isn’t easy, especially when sentiment is weak. That’s where StockStory comes in - to help you find attractive investment candidates backed by unbiased research. 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:
Five Below (FIVE)
Consensus Price Target: $131.27 (-2.6% implied return)
Often facilitating a treasure hunt shopping experience, Five Below (NASDAQ: FIVE) is an American discount retailer that sells a variety of products from mobile phone cases to candy to sports equipment for largely $5 or less.
Why Do We Think Twice About FIVE?
- Poor same-store sales performance over the past two years indicates it’s having trouble bringing new shoppers into its brick-and-mortar locations
- Subscale operations are evident in its revenue base of $4.04 billion, meaning it has fewer distribution channels than its larger rivals
- ROIC of 11% reflects management’s challenges in identifying attractive investment opportunities, and its shrinking returns suggest its past profit sources are losing steam
Five Below’s stock price of $134.72 implies a valuation ratio of 28.8x forward P/E. If you’re considering FIVE for your portfolio, see our FREE research report to learn more.
Kadant (KAI)
Consensus Price Target: $335 (3.6% implied return)
Headquartered in Massachusetts, Kadant (NYSE: KAI) is a global supplier of high-value, critical components and engineered systems used in process industries worldwide.
Why Does KAI Fall Short?
- Sales trends were unexciting over the last two years as its 7.2% annual growth was below the typical industrials company
- Sales are projected to remain flat over the next 12 months as demand decelerates from its two-year trend
- Earnings growth over the last two years fell short of the peer group average as its EPS only increased by 3.4% annually
At $323.43 per share, Kadant trades at 31.8x forward P/E. Check out our free in-depth research report to learn more about why KAI doesn’t pass our bar.
One Stock to Buy:
Axon (AXON)
Consensus Price Target: $744.23 (-0.6% implied return)
Providing body cameras and tasers for first responders, AXON (NASDAQ: AXON) develops technology solutions and weapons products for military, law enforcement, and civilians.
Why Is AXON a Good Business?
- Average unit sales growth of 32% over the past two years reflects steady demand for its products
- Free cash flow margin jumped by 20.3 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
Axon is trading at $748.72 per share, or 126.1x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
Stocks We Like Even More
The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.
While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio by checking out our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today
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