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.

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 where the skepticism is well-placed and some better opportunities to consider.

FedEx (FDX)

Consensus Price Target: $272.29 (1.1% implied return)

Sporting one of the largest air cargo fleets in the world, FedEx (NYSE: FDX) is a global provider of parcel and cargo delivery services.

Why Do We Steer Clear of FDX?

1. Sales stagnated over the last two years and signal the need for new growth strategies
2. Low free cash flow margin of 2.4% for the last five years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
3. Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned

At $269.25 per share, FedEx trades at 14.5x forward P/E. To fully understand why you should be careful with FDX, check out our full research report (it’s free for active Edge members).

Landstar (LSTR)

Consensus Price Target: $131 (-5.7% implied return)

Covering billions of miles throughout North America, Landstar (NASDAQ: LSTR) is a transportation company specializing in freight and last-mile delivery services.

Why Do We Avoid LSTR?

1. Customers postponed purchases of its products and services this cycle as its revenue declined by 8.9% annually over the last two years
2. Performance over the past five years shows its incremental sales were less profitable as its earnings per share were flat
3. Waning returns on capital imply its previous profit engines are losing steam

Landstar’s stock price of $138.92 implies a valuation ratio of 25.8x forward P/E. If you’re considering LSTR for your portfolio, see our FREE research report to learn more.

Gilead Sciences (GILD)

Consensus Price Target: $130.63 (4.3% implied return)

From its groundbreaking work in developing the first single-tablet regimens for HIV treatment, Gilead Sciences (NASDAQ: GILD) develops and markets innovative medicines for life-threatening diseases including HIV, viral hepatitis, COVID-19, and cancer.

Why Does GILD Worry Us?

1. Large revenue base makes it harder to increase sales quickly, and its annual revenue growth of 3% over the last two years was below our standards for the healthcare sector
2. Costs have risen faster than its revenue over the last five years, causing its adjusted operating margin to decline by 6.9 percentage points
3. Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability

Gilead Sciences is trading at $125.25 per share, or 14.6x forward P/E. Read our free research report to see why you should think twice about including GILD in your portfolio.

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