Wall Street has set ambitious price targets for the stocks in this article. While this suggests attractive upside potential, it’s important to remain skeptical because analysts face institutional pressures that can sometimes lead to overly optimistic forecasts.
Unlike the investment banks, we created StockStory to provide independent analysis that helps you determine which companies are truly worth following. That said, here is one stock where Wall Street’s excitement appears well-founded and two where consensus estimates seem disconnected from reality.
Two Stocks to Sell:
The Pennant Group (PNTG)
Consensus Price Target: $32.20 (35.6% implied return)
Spun off from The Ensign Group in 2019 to focus on non-skilled nursing healthcare services, Pennant Group (NASDAQ: PNTG) operates home health, hospice, and senior living facilities across 13 western and midwestern states, serving patients of all ages including seniors.
Why Does PNTG Worry Us?
- Modest revenue base of $847.3 million gives it less fixed cost leverage and fewer distribution channels than larger companies
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 1.3% for the last five years
- Low returns on capital reflect management’s struggle to allocate funds effectively
The Pennant Group is trading at $23.75 per share, or 18.6x forward P/E. Check out our free in-depth research report to learn more about why PNTG doesn’t pass our bar.
OceanFirst Financial (OCFC)
Consensus Price Target: $21.50 (18.5% implied return)
Tracing its roots back to 1902 when it began serving coastal New Jersey communities, OceanFirst Financial (NASDAQ: OCFC) operates as a regional bank holding company that provides commercial and consumer banking services primarily in New Jersey and surrounding metropolitan areas.
Why Is OCFC Risky?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 5% annually over the last two years
- Net interest income trends were unexciting over the last five years as its 2.4% annual growth was below the typical banking firm
- Sales were less profitable over the last two years as its earnings per share fell by 16.3% annually, worse than its revenue declines
OceanFirst Financial’s stock price of $18.15 implies a valuation ratio of 0.6x forward P/B. If you’re considering OCFC for your portfolio, see our FREE research report to learn more.
One Stock to Buy:
Stride (LRN)
Consensus Price Target: $122 (73% implied return)
Formerly known as K12, Stride (NYSE: LRN) is an education technology company providing education solutions through digital platforms.
Why Is LRN a Top Pick?
- Increase in enrollments shows customers are eagerly embracing its offerings
- Free cash flow margin increased by 7.4 percentage points over the last five years, giving the company more capital to invest or return to shareholders
- Rising returns on capital show management is finding more attractive investment opportunities
At $70.50 per share, Stride trades at 8.6x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free for active Edge members.
High-Quality Stocks for All Market Conditions
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