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. Keeping that in mind, 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:
Strategic Education (STRA)
Consensus Price Target: $99.33 (27.5% implied return)
Formed through the merger of Strayer Education and Capella Education in 2018, Strategic Education (NASDAQ: STRA) is a career-focused higher education provider.
Why Do We Pass on STRA?
- Demand for its offerings was relatively low as its number of domestic students has underwhelmed
- Performance over the past five years shows its incremental sales were much less profitable, as its earnings per share fell by 7.1% annually
- Low returns on capital reflect management’s struggle to allocate funds effectively
At $77.90 per share, Strategic Education trades at 12.8x forward P/E. To fully understand why you should be careful with STRA, check out our full research report (it’s free).
CoreCivic (CXW)
Consensus Price Target: $31.50 (54% 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 Are We Wary of CXW?
- Products and services are facing end-market challenges during this cycle, as seen in its flat sales over the last five years
- Performance surrounding its average available beds has lagged its peers
- Low returns on capital reflect management’s struggle to allocate funds effectively
CoreCivic’s stock price of $20.46 implies a valuation ratio of 16.5x forward P/E. Check out our free in-depth research report to learn more about why CXW doesn’t pass our bar.
One Stock to Watch:
Concentrix (CNXC)
Consensus Price Target: $67.67 (38.5% implied return)
With a team of approximately 450,000 employees across 75 countries, Concentrix (NASDAQ: CNXC) designs and delivers customer experience solutions that help global brands manage their customer interactions across digital channels and contact centers.
Why Could CNXC Be a Winner?
- Market share has increased this cycle as its 22% annual revenue growth over the last two years was exceptional
- Economies of scale give it some operating leverage when demand rises
- Can finance growth initiatives independently due to its satisfactory free cash flow margin of 5.5% for the past five years
Concentrix is trading at $48.85 per share, or 4.1x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
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