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.
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. Keeping that in mind, here are three stocks facing legitimate challenges and some alternatives worth exploring instead.
Varonis (VRNS)
Consensus Price Target: $54.01 (5.7% implied return)
Founded by a duo of former Israeli Defense Forces cyber warfare engineers, Varonis (NASDAQ: VRNS) offers software-as-service that helps customers protect data from cyber threats and gain visibility into how enterprise data is being used.
Why Does VRNS Fall Short?
- Revenue increased by 11.7% annually over the last three years, acceptable on an absolute basis but tepid for a software company enjoying secular tailwinds
- Persistent operating margin losses suggest the business manages its expenses poorly
Varonis is trading at $51.10 per share, or 8.9x forward price-to-sales. If you’re considering VRNS for your portfolio, see our FREE research report to learn more.
BeautyHealth (SKIN)
Consensus Price Target: $1.66 (-29.4% implied return)
Operating in the emerging beauty health category, the appropriately named BeautyHealth (NASDAQ: SKIN) is a skincare company best known for its Hydrafacial product that cleanses and hydrates skin.
Why Is SKIN Risky?
- Sales trends were unexciting over the last three years as its 3.8% annual growth was below the typical consumer staples company
- Historical operating margin losses point to an inefficient cost structure
- High net-debt-to-EBITDA ratio of 10× increases the risk of forced asset sales or dilutive financing if operational performance weakens
At $2.35 per share, BeautyHealth trades at 17.2x forward EV-to-EBITDA. To fully understand why you should be careful with SKIN, check out our full research report (it’s free).
Radian Group (RDN)
Consensus Price Target: $36.83 (3.2% implied return)
Founded during the housing boom of 1977 and weathering multiple real estate cycles since, Radian Group (NYSE: RDN) provides mortgage insurance and real estate services, helping lenders manage risk and homebuyers achieve affordable homeownership.
Why Do We Think Twice About RDN?
- Insurance products are facing significant market challenges during this cycle as net premiums earned has declined by 3.8% annually over the last four years
- Day-to-day expenses have swelled relative to revenue over the last two years as its combined ratio increased by 34.1 percentage points
- Earnings per share fell by 6.6% annually over the last two years while its revenue grew, showing its incremental sales were much less profitable
Radian Group’s stock price of $35.70 implies a valuation ratio of 1x forward P/B. Dive into our free research report to see why there are better opportunities than RDN.
Stocks We Like More
Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.
While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like 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 Kadant (+351% 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
