The stocks in this article have caught Wall Street’s attention in a big way, with price targets implying returns above 20%. But investors should take these forecasts with a grain of salt because analysts typically say nice things about companies so their firms can win business in other product lines like M&A advisory.
Luckily for you, we at StockStory have no conflicts of interest - our sole job is to help you find genuinely promising companies. Keeping that in mind, here are two stocks where Wall Street’s excitement appears well-founded and one where consensus estimates seem disconnected from reality.
One Stock to Sell:
Sportsman's Warehouse (SPWH)
Consensus Price Target: $3.85 (77.4% implied return)
A go-to destination for individuals passionate about hunting, fishing, camping, hiking, shooting sports, and more, Sportsman's Warehouse (NASDAQ:SPWH) is an American specialty retailer offering a diverse range of active gear, equipment, and apparel.
Why Do We Pass on SPWH?
- Poor same-store sales performance over the past two years indicates it’s having trouble bringing new shoppers into its brick-and-mortar locations
- Capital intensity has ramped up over the last year as its free cash flow margin decreased by 9.2 percentage points
- Depletion of cash reserves could lead to a fundraising event that triggers shareholder dilution
Sportsman's Warehouse’s stock price of $2.17 implies a valuation ratio of 2.2x forward EV-to-EBITDA. Check out our free in-depth research report to learn more about why SPWH doesn’t pass our bar.
Two Stocks to Watch:
BWX (BWXT)
Consensus Price Target: $216.40 (23.2% implied return)
Contributing components and materials to the famous Manhattan Project in the 1940s, BWX (NYSE:BWXT) is a manufacturer and service provider of nuclear components and fuel for government and commercial industries.
Why Is BWXT Interesting?
- Annual revenue growth of 13% over the past two years was outstanding, reflecting market share gains this cycle
- Demand for the next 12 months is expected to accelerate above its two-year trend as Wall Street forecasts robust revenue growth of 14.8%
- Free cash flow margin increased by 16.9 percentage points over the last five years, giving the company more capital to invest or return to shareholders
At $175.63 per share, BWX trades at 45.2x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free for active Edge members.
Nicolet Bankshares (NIC)
Consensus Price Target: $155.80 (23.7% implied return)
Starting as Green Bay Financial Corporation in 2000 before rebranding in 2002, Nicolet Bankshares (NYSE:NIC) is a regional bank holding company that provides commercial, agricultural, and consumer banking services primarily in Wisconsin, Michigan, and Minnesota.
Why Do We Like NIC?
- Market share has increased this cycle as its 18.5% annual net interest income growth over the last five years was exceptional
- Market share is on track to rise over the next 12 months as its 33.8% projected net interest income growth implies demand will accelerate from its five-year trend
- Net interest margin grew by 42.7 basis points (100 basis points = 1 percentage point) over the last two years, giving the firm more chips to play with
Nicolet Bankshares is trading at $125.98 per share, or 1.5x forward P/B. Is now the time to initiate a position? See for yourself in our in-depth research report, it’s free for active Edge members.