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.
At StockStory, we look beyond the headlines with our independent analysis to determine whether these bullish calls are justified. Keeping that in mind, here is one stock likely to meet or exceed Wall Street’s lofty expectations and two where its enthusiasm might be excessive.
Two Stocks to Sell:
USANA (USNA)
Consensus Price Target: $61 (194% implied return)
Going to market with a direct selling model rather than through traditional retailers, USANA Health Sciences (NYSE: USNA) manufactures and sells nutritional, personal care, and skincare products.
Why Are We Hesitant About USNA?
- Annual sales declines of 5.9% for the past three years show its products struggled to connect with the market
- Modest revenue base of $899.2 million gives it less fixed cost leverage and fewer distribution channels than larger companies
- Earnings per share decreased by more than its revenue over the last three years, showing each sale was less profitable
At $20.73 per share, USANA trades at 9.6x forward P/E. Check out our free in-depth research report to learn more about why USNA doesn’t pass our bar.
Perma-Fix (PESI)
Consensus Price Target: $18 (71.2% implied return)
Tackling hazardous waste challenges since 1990, Perma-Fix (NASDAQ: PESI) provides environmental waste treatment services.
Why Is PESI Risky?
- Sales tumbled by 8.1% annually over the last five years, showing market trends are working against its favor during this cycle
- Free cash flow margin dropped by 31.6 percentage points over the last five years, implying the company became more capital intensive as competition picked up
- Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
Perma-Fix is trading at $10.52 per share, or 2.4x forward price-to-sales. Dive into our free research report to see why there are better opportunities than PESI.
One Stock to Buy:
Duolingo (DUOL)
Consensus Price Target: $451.74 (35.1% implied return)
Founded by a Carnegie Mellon computer science professor and his Ph.D. student, Duolingo (NASDAQ: DUOL) is a mobile app helping people learn new languages.
Why Is DUOL a Top Pick?
- Monthly Active Users are rising, meaning the company can increase revenue without incurring additional customer acquisition costs if it can cross-sell additional products and features
- Incremental sales significantly boosted profitability as its annual earnings per share growth of 311% over the last three years outstripped its revenue performance
- Impressive free cash flow profitability enables the company to fund new investments or reward investors with share buybacks/dividends, and its rising cash conversion increases its margin of safety
Duolingo’s stock price of $334.73 implies a valuation ratio of 47.8x forward EV/EBITDA. Is now the right time to buy? See for yourself in our comprehensive research report, it’s free for active Edge members .
High-Quality Stocks for All Market Conditions
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