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.
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 is one stock where you should be greedy instead of fearful and two where the outlook is warranted.
Two Stocks to Sell:
Paramount (PARA)
Consensus Price Target: $12.75 (9.8% implied return)
Owner of Spongebob Squarepants and formerly known as ViacomCBS, Paramount Global (NASDAQ:PARA) is a major media conglomerate offering television, film production, and digital content across various global platforms.
Why Do We Pass on PARA?
- Annual sales declines of 1.6% for the past two years show its products and services struggled to connect with the market
- Performance over the past five years shows its incremental sales were much less profitable, as its earnings per share fell by 20.5% annually
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
At $11.61 per share, Paramount trades at 7.9x forward price-to-earnings. To fully understand why you should be careful with PARA, check out our full research report (it’s free).
Mercury Systems (MRCY)
Consensus Price Target: $45 (-13.9% implied return)
Founded in 1981, Mercury Systems (NASDAQ:MRCY) specializes in providing processing subsystems and components for primarily defense applications.
Why Is MRCY Risky?
- Organic revenue growth fell short of our benchmarks over the past two years and implies it may need to improve its products, pricing, or go-to-market strategy
- Earnings per share fell by 47.2% annually over the last five years while its revenue grew, partly because it diluted shareholders
- Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results
Mercury Systems’s stock price of $52.25 implies a valuation ratio of 99x forward price-to-earnings. Dive into our free research report to see why there are better opportunities than MRCY.
One Stock to Buy:
TransDigm (TDG)
Consensus Price Target: $1,483 (4.9% implied return)
Supplying parts for nearly all aircraft currently in service, TransDigm (NYSE:TDG) develops and manufactures components and systems for military and commercial aviation.
Why Should You Buy TDG?
- Core business is healthy and doesn’t need acquisitions to boost sales as its organic revenue growth averaged 16.2% over the past two years
- Performance over the past two years shows its incremental sales were extremely profitable, as its annual earnings per share growth of 38.4% outpaced its revenue gains
- Robust free cash flow margin of 20.3% gives it many options for capital deployment, and its rising cash conversion increases its margin of safety
TransDigm is trading at $1,413 per share, or 36.3x forward price-to-earnings. Is now the time to initiate a position? Find out in our full research report, it’s free.
Stocks We Like Even More
The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.
While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio by checking out our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.
Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like United Rentals (+322% five-year return). Find your next big winner with StockStory today for free.