Wall Street has set ambitious price targets for the stocks in this article. While this suggests attractive upside potential, it’s important to remain skeptical because analysts face institutional pressures that can sometimes lead to overly optimistic forecasts.

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 may be overlooking some important risks and some alternatives with better fundamentals.

Simply Good Foods (SMPL)

Consensus Price Target: $38.10 (28.1% implied return)

Best known for its Atkins brand that was inspired by the popular diet of the same name, Simply Good Foods (NASDAQ: SMPL) is a packaged food company whose offerings help customers achieve their healthy eating or weight loss goals.

Why Does SMPL Give Us Pause?

1. Modest revenue base of $1.46 billion gives it less fixed cost leverage and fewer distribution channels than larger companies
2. Estimated sales growth of 1.5% for the next 12 months implies demand will slow from its three-year trend
3. Free cash flow margin shrank by 5.5 percentage points over the last year, suggesting the company is consuming more capital to stay competitive

At $29.74 per share, Simply Good Foods trades at 14.9x forward P/E. Dive into our free research report to see why there are better opportunities than SMPL.

The Real Brokerage (REAX)

Consensus Price Target: $6.33 (40.7% implied return)

Founded in Toronto, Canada in 2014, The Real Brokerage (NASDAQ: REAX) is a technology-driven real estate brokerage firm combining a tech-centric model with an agent-centric philosophy.

Why Do We Think Twice About REAX?

1. Poor expense management has led to operating margin losses
2. Performance over the past five years shows its incremental sales were less profitable as its earnings per share were flat
3. Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 3.4% for the last two years

The Real Brokerage’s stock price of $4.50 implies a valuation ratio of 16.9x forward EV-to-EBITDA. To fully understand why you should be careful with REAX, check out our full research report (it’s free).

Unum Group (UNM)

Consensus Price Target: $93.54 (31.7% implied return)

Tracing its roots back to 1848 when financial security for workers was virtually non-existent, Unum Group (NYSE: UNM) provides workplace financial protection benefits including disability, life, accident, critical illness, dental and vision insurance primarily through employers.

Why Are We Hesitant About UNM?

1. Scale presents growth limitations compared to smaller competitors, evidenced by its below-average 2.8% annualized growth in net premiums earned for the last five years
2. Estimated sales growth of 2.2% for the next 12 months implies demand will slow from its two-year trend
3. Earnings growth underperformed the sector average over the last two years as its EPS grew by just 9.7% annually

Unum Group is trading at $71.01 per share, or 1x forward P/B. Read our free research report to see why you should think twice about including UNM in your portfolio.

High-Quality Stocks for All Market Conditions

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