Wall Street’s bearish price targets for the stocks in this article signal serious concerns. Such forecasts are uncommon in an industry where maintaining cordial corporate relationships often trumps delivering the hard truth.
Whatever the consensus opinion may be, our team at StockStory cuts through the noise by conducting independent analysis to determine a company’s long-term prospects. That said, here are three stocks facing legitimate challenges and some alternatives worth exploring instead.
LGI Homes (LGIH)
Consensus Price Target: $67 (5.9% implied return)
Based in Texas, LGI Homes (NASDAQ:LGIH) is a homebuilding company specializing in constructing affordable, entry-level single-family homes in desirable communities across the United States.
Why Are We Out on LGIH?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 8.6% annually over the last five years
- Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
- Limited cash reserves may force the company to seek unfavorable financing terms that could dilute shareholders
At $63.27 per share, LGI Homes trades at 17.4x forward P/E. Dive into our free research report to see why there are better opportunities than LGIH.
State Street (STT)
Consensus Price Target: $161.18 (-5.3% implied return)
Dating back to 1792 when Boston's Long Wharf was the center of global shipping and trade, State Street (NYSE:STT) provides custody, investment management, and other financial services to institutional investors like pension funds, asset managers, and central banks worldwide.
Why Does STT Fall Short?
- Annual sales growth of 4.6% over the last five years lagged behind its financials peers as its large revenue base made it difficult to generate incremental demand
State Street is trading at $170.14 per share, or 13.4x forward P/E. If you’re considering STT for your portfolio, see our FREE research report to learn more.
Goldman Sachs (GS)
Consensus Price Target: $951.30 (-6.9% implied return)
Founded in 1869 as a small commercial paper business in New York City, Goldman Sachs (NYSE:GS) is a global financial institution that provides investment banking, securities, asset management, and consumer banking services to corporations, governments, and individuals.
Why Do We Think Twice About GS?
- Annual sales growth of 2.5% over the last five years lagged behind its financials peers as its large revenue base made it difficult to generate incremental demand
- Earnings growth over the last five years fell short of the peer group average as its EPS only increased by 3.1% annually
- Scale is a double-edged sword because it limits the firm’s capital growth potential compared to its smaller competitors, as reflected in its below-average annual tangible book value per share increases of 5.9% for the last two years
Goldman Sachs’s stock price of $1,021 implies a valuation ratio of 17x forward P/E. Check out our free in-depth research report to learn more about why GS doesn’t pass our bar.
High-Quality Stocks for All Market Conditions
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