Wall Street is overwhelmingly bullish on the stocks in this article, with price targets suggesting significant upside potential. However, it’s worth remembering that analysts rarely issue sell ratings, partly because their firms often seek other business from the same companies they cover.
At StockStory, we look beyond the headlines with our independent analysis to determine whether these bullish calls are justified. That said, here are three stocks where Wall Street’s estimates seem disconnected from reality and some better opportunities to consider.
IPG Photonics (IPGP)
Consensus Price Target: $94 (30.4% implied return)
Both a designer and manufacturer of its products, IPG Photonics (NASDAQ: IPGP) is a provider of high-performance fiber lasers used for cutting, welding, and processing raw materials.
Why Do We Steer Clear of IPGP?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 3.8% annually over the last five years
- Sales were less profitable over the last five years as its earnings per share fell by 20% annually, worse than its revenue declines
- Free cash flow margin dropped by 15.1 percentage points over the last five years, implying the company became more capital intensive as competition picked up
At $72.11 per share, IPG Photonics trades at 52.5x forward P/E. If you’re considering IPGP for your portfolio, see our FREE research report to learn more.
Graphic Packaging Holding (GPK)
Consensus Price Target: $18.68 (24% implied return)
Founded in 1991, Graphic Packaging (NYSE: GPK) is a provider of paper-based packaging solutions for a wide range of products.
Why Is GPK Risky?
- Declining unit sales over the past two years suggest it might have to lower prices to accelerate growth
- Estimated sales for the next 12 months are flat and imply a softer demand environment
- Earnings per share have contracted by 12.8% annually over the last two years, a headwind for returns as stock prices often echo long-term EPS performance
Graphic Packaging Holding is trading at $15.06 per share, or 8.3x forward P/E. Read our free research report to see why you should think twice about including GPK in your portfolio.
Integra LifeSciences (IART)
Consensus Price Target: $15.50 (24.5% implied return)
Founded in 1989 as a pioneer in regenerative medicine technology, Integra LifeSciences (NASDAQ: IART) develops and manufactures medical technologies for neurosurgery, wound care, and surgical reconstruction, including regenerative tissue products and surgical instruments.
Why Should You Sell IART?
- Organic sales performance over the past two years indicates the company may need to make strategic adjustments or rely on M&A to catalyze faster growth
- Free cash flow margin dropped by 19.6 percentage points over the last five years, implying the company became more capital intensive as competition picked up
- High net-debt-to-EBITDA ratio of 6× increases the risk of forced asset sales or dilutive financing if operational performance weakens
Integra LifeSciences’s stock price of $12.45 implies a valuation ratio of 5.2x forward P/E. To fully understand why you should be careful with IART, check out our full research report (it’s free for active Edge members).
High-Quality Stocks for All Market Conditions
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