Wall Street’s bearish price targets for the stocks in this article signal serious concerns. Such forecasts are uncommon in an industry where maintaining cordial corporate relationships often trumps delivering the hard truth.
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. That said, here are three stocks where the skepticism is well-placed and some better opportunities to consider.
Columbia Sportswear (COLM)
Consensus Price Target: $70.83 (16.2% implied return)
Originally founded as a hat store in 1938, Columbia Sportswear (NASDAQ:COLM) is a manufacturer of outerwear, sportswear, and footwear designed for outdoor enthusiasts.
Why Do We Steer Clear of COLM?
- Muted 3.9% annual revenue growth over the last five years shows its demand lagged behind its consumer discretionary peers
- Low free cash flow margin of 8.5% for the last two years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
At $60.97 per share, Columbia Sportswear trades at 16.2x forward P/E. Read our free research report to see why you should think twice about including COLM in your portfolio.
Brunswick (BC)
Consensus Price Target: $90.18 (13.2% implied return)
Formerly known as Brunswick-Balke-Collender Company, Brunswick (NYSE: BC) is a designer and manufacturer of recreational marine products, including boats, engines, and marine parts.
Why Should You Sell BC?
- Flat sales over the last five years suggest it must innovate and find new ways to grow
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 8% for the last two years
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
Brunswick’s stock price of $79.67 implies a valuation ratio of 16.8x forward P/E. To fully understand why you should be careful with BC, check out our full research report (it’s free).
Simpson (SSD)
Consensus Price Target: $218.80 (17.2% implied return)
Aiming to build safer and stronger buildings, Simpson (NYSE:SSD) designs and manufactures structural connectors, anchors, and other construction products.
Why Does SSD Worry Us?
- Annual revenue growth of 4.7% over the last two years was below our standards for the industrials sector
- Costs have risen faster than its revenue over the last five years, causing its operating margin to decline by 4.7 percentage points
- Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability
Simpson is trading at $186.68 per share, or 20.7x forward P/E. Check out our free in-depth research report to learn more about why SSD doesn’t pass our bar.
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