When Wall Street turns bearish on a stock, it’s worth paying attention. These calls stand out because analysts rarely issue grim ratings on companies for fear their firms will lose out in other business lines such as M&A advisory.
At StockStory, we look beyond the headlines with our independent analysis to determine whether these bearish calls are justified. Keeping that in mind, here are three stocks where the skepticism is well-placed and some better opportunities to consider.
Collegium Pharmaceutical (COLL)
Consensus Price Target: $48.67 (-1.8% implied return)
Pioneering abuse-deterrent technology in a field plagued by addiction concerns, Collegium Pharmaceutical (NASDAQ: COLL) develops and markets specialty medications for treating moderate to severe pain, including abuse-deterrent opioid formulations.
Why Are We Wary of COLL?
- Smaller revenue base of $757.1 million means it hasn’t achieved the economies of scale that some industry juggernauts enjoy
- Diminishing returns on capital suggest its earlier profit pools are drying up
Collegium Pharmaceutical’s stock price of $49.54 implies a valuation ratio of 6.5x forward P/E. Read our free research report to see why you should think twice about including COLL in your portfolio.
FTI Consulting (FCN)
Consensus Price Target: $166 (-5% implied return)
With a team of experts deployed across 30+ countries to tackle complex business challenges, FTI Consulting (NYSE: FCN) is a global business advisory firm that helps organizations manage change, mitigate risk, and resolve disputes across financial, legal, operational, and regulatory matters.
Why Do We Think Twice About FCN?
- Expenses have increased as a percentage of revenue over the last five years as its adjusted operating margin fell by 2.7 percentage points
- Free cash flow margin dropped by 9.1 percentage points over the last five years, implying the company became more capital intensive as competition picked up
FTI Consulting is trading at $174.74 per share, or 20.5x forward P/E. To fully understand why you should be careful with FCN, check out our full research report (it’s free for active Edge members).
BNY (BK)
Consensus Price Target: $119.03 (4.3% implied return)
Tracing its roots back to 1784 when it was founded by Alexander Hamilton, BNY (NYSE: BK) is a global financial institution that provides asset servicing, wealth management, and investment services to institutions, corporations, and high-net-worth individuals.
Why Is BK Not Exciting?
- Sizable revenue base leads to growth challenges as its 4.2% annual revenue increases over the last five years fell short of other financials companies
- Large asset base makes it harder to grow tangible book value per share quickly, and its annual tangible book value per share growth of 3.2% over the last five years was below our standards for the financials sector
- Below-average return on equity indicates management struggled to find compelling investment opportunities
At $114.14 per share, BNY trades at 14.2x forward P/E. Check out our free in-depth research report to learn more about why BK doesn’t pass our bar.
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