Wall Street has issued downbeat forecasts for the stocks in this article. These predictions are rare - financial institutions typically hesitate to say bad things about a company because it can jeopardize their other revenue-generating business lines like M&A advisory.
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. Keeping that in mind, here are three stocks facing legitimate challenges and some alternatives worth exploring instead.
Texas Instruments (TXN)
Consensus Price Target: $188.50 (7% implied return)
Headquartered in Dallas, Texas since the 1950s, Texas Instruments (NASDAQ:TXN) is the world’s largest producer of analog semiconductors.
Why Does TXN Give Us Pause?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 2.4% annually over the last two years
- Efficiency has decreased over the last five years as its operating margin fell by 13.5 percentage points
- Free cash flow margin shrank by 28.5 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
Texas Instruments’s stock price of $176.11 implies a valuation ratio of 29.9x forward P/E. Read our free research report to see why you should think twice about including TXN in your portfolio.
Toll Brothers (TOL)
Consensus Price Target: $149.36 (8% implied return)
Started by two brothers who started by building and selling just one home in Pennsylvania, today Toll Brothers (NYSE:TOL) is a luxury homebuilder across the United States.
Why Are We Hesitant About TOL?
- Product roadmap and go-to-market strategy need to be reconsidered as its backlog has averaged 8.5% declines over the past two years
- Estimated sales decline of 4.7% for the next 12 months implies a challenging demand environment
- Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 3.6 percentage points
At $138.29 per share, Toll Brothers trades at 10.8x forward P/E. To fully understand why you should be careful with TOL, check out our full research report (it’s free for active Edge members).
American Financial Group (AFG)
Consensus Price Target: $140.60 (2.2% implied return)
With roots dating back to 1872 and a business model that empowers local decision-making, American Financial Group (NYSE:AFG) is an insurance holding company that specializes in commercial property and casualty insurance products for businesses through its Great American Insurance Group.
Why Is AFG Not Exciting?
- Net premiums earned expanded by 4.8% annually over the last five years, falling below our expectations for the insurance sector
- Incremental sales over the last two years were much less profitable as its earnings per share fell by 4.5% annually while its revenue grew
- Book value per share tumbled by 4.8% annually over the last five years, showing insurance sector trends are working against its favor during this cycle
American Financial Group is trading at $137.60 per share, or 2.4x forward P/B. If you’re considering AFG for your portfolio, see our FREE research report to learn more.
High-Quality Stocks for All Market Conditions
Your portfolio can’t afford to be based on yesterday’s story. The risk in a handful of heavily crowded stocks is rising daily.
The names generating the next wave of massive growth are right here in our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today.