Wall Street has issued downbeat forecasts for the stocks in this article. These predictions are rare - financial institutions typically hesitate to say bad things about a company because it can jeopardize their other revenue-generating business lines like M&A advisory.
At StockStory, we look beyond the headlines with our independent analysis to determine whether these bearish calls are justified. Keeping that in mind, here is one stock poised to prove Wall Street wrong and two facing legitimate challenges.
Two Stocks to Sell:
Polaris (PII)
Consensus Price Target: $66.45 (2% implied return)
Founded in 1954, Polaris (NYSE: PII) designs and manufactures high-performance off-road vehicles, snowmobiles, and motorcycles.
Why Are We Out on PII?
- Sales tumbled by 11.9% annually over the last two years, showing consumer trends are working against its favor
- Capital intensity will likely ramp up in the next year as its free cash flow margin is expected to contract by 5.3 percentage points
- Eroding returns on capital suggest its historical profit centers are aging
Polaris is trading at $65.17 per share, or 60.6x forward P/E. If you’re considering PII for your portfolio, see our FREE research report to learn more.
Avis Budget Group (CAR)
Consensus Price Target: $135.75 (-5.6% implied return)
The parent company of brands such as Zipcar and Budget Truck Rental, Avis (NASDAQ: CAR) is a provider of car rental and mobility solutions.
Why Are We Wary of CAR?
- Performance surrounding its available rental days - car rental has lagged its peers
- Waning returns on capital imply its previous profit engines are losing steam
- Unfavorable liquidity position could lead to additional equity financing that dilutes shareholders
At $143.83 per share, Avis Budget Group trades at 17.8x forward P/E. Check out our free in-depth research report to learn more about why CAR doesn’t pass our bar.
One Stock to Watch:
AAR (AIR)
Consensus Price Target: $91 (8.5% implied return)
The first third-party MRO approved by the FAA for Safety Management System Requirements, AAR (NYSE: AIR) is a provider of aircraft maintenance services
Why Could AIR Be a Winner?
- Market share has increased this cycle as its 16.8% annual revenue growth over the last two years was exceptional
- Sales outlook for the upcoming 12 months implies the business will stay on its desirable two-year growth trajectory
- Earnings growth has massively outpaced its peers over the last five years as its EPS has compounded at 18.9% annually
AAR’s stock price of $83.84 implies a valuation ratio of 10.7x forward EV-to-EBITDA. Is now the right time to buy? Find out in our full research report, it’s free for active Edge members.
High-Quality Stocks for All Market Conditions
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