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. That said, here are three stocks where the outlook is warranted and some alternatives with better fundamentals.
NVR (NVR)
Consensus Price Target: $7,070 (4.9% implied return)
Known for its unique land acquisition strategy, NVR (NYSE: NVR) is a respected homebuilder and mortgage company in the United States.
Why Should You Sell NVR?
- Sales were flat over the last two years, indicating it’s failed to expand this cycle
- Earnings per share fell by 7.5% annually over the last two years while its revenue was flat, showing each sale was less profitable
- Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability
NVR’s stock price of $6,742 implies a valuation ratio of 17.6x forward P/E. To fully understand why you should be careful with NVR, check out our full research report (it’s free).
Pediatrix Medical Group (MD)
Consensus Price Target: $23.17 (-13.3% implied return)
With a network of approximately 2,620 affiliated physicians caring for some of the most vulnerable patients, Pediatrix Medical Group (NYSE: MD) provides specialized physician services focused on neonatal, maternal-fetal, pediatric cardiology and other pediatric subspecialty care across 37 states.
Why Is MD Not Exciting?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 1.7% annually over the last two years
- Projected sales for the next 12 months are flat and suggest demand will be subdued
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
At $26.73 per share, Pediatrix Medical Group trades at 11.5x forward P/E. Read our free research report to see why you should think twice about including MD in your portfolio.
CoreCivic (CXW)
Consensus Price Target: $29.80 (-3.6% implied return)
Originally founded in 1983 as the first private prison company in the United States, CoreCivic (NYSE: CXW) operates correctional facilities, detention centers, and residential reentry programs for government agencies across the United States.
Why Do We Think Twice About CXW?
- Sales trends were unexciting over the last five years as its 4.6% annual growth was below the typical business services company
- Expenses have increased as a percentage of revenue over the last five years as its adjusted operating margin fell by 3.2 percentage points
- Free cash flow margin dropped by 6.6 percentage points over the last five years, implying the company became more capital intensive as competition picked up
CoreCivic is trading at $30.93 per share, or 19.1x forward P/E. If you’re considering CXW for your portfolio, see our FREE research report to learn more.
High-Quality Stocks for All Market Conditions
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