3 of Wall Street's Favorite Stocks Walking a Fine Line

Wall Street has set ambitious price targets for the stocks in this article. While this suggests attractive upside potential, it’s important to remain skeptical because analysts face institutional pressures that can sometimes lead to overly optimistic forecasts.

Luckily for you, we at StockStory have no conflicts of interest - our sole job is to help you find genuinely promising companies. Keeping that in mind, here are three stocks where Wall Street’s enthusiasm may be misplaced and some other investments worth exploring instead.

Hilton Grand Vacations (HGV)

Consensus Price Target: $53.56 (18.3% implied return)

Spun off from Hilton Worldwide in 2017, Hilton Grand Vacations (NYSE:HGV) is a global timeshare company that provides travel experiences for its customers through its timeshare resorts and club membership programs.

Why Do We Think Twice About HGV?

1. Annual revenue growth of 11.2% over the last two years was below our standards for the consumer discretionary sector
2. Below-average returns on capital indicate management struggled to find compelling investment opportunities
3. High net-debt-to-EBITDA ratio of 15× could force the company to raise capital at unfavorable terms if market conditions deteriorate

Hilton Grand Vacations’s stock price of $45.26 implies a valuation ratio of 12.3x forward P/E. To fully understand why you should be careful with HGV, check out our full research report (it’s free).

Flowserve (FLS)

Consensus Price Target: $66.50 (25.4% implied return)

Manufacturing the largest pump ever built for nuclear power generation, Flowserve (NYSE:FLS) manufactures and sells flow control equipment for various industries.

Why Are We Wary of FLS?

1. Sales pipeline suggests its future revenue growth may not meet our standards as its average backlog growth of 1.6% for the past two years was weak
2. Estimated sales growth of 5.8% for the next 12 months implies demand will slow from its two-year trend
3. Poor free cash flow margin of 5% for the last five years limits its freedom to invest in growth initiatives, execute share buybacks, or pay dividends

At $53.01 per share, Flowserve trades at 15.4x forward P/E. If you’re considering FLS for your portfolio, see our FREE research report to learn more.

Fortive (FTV)

Consensus Price Target: $63 (31.8% implied return)

Taking its name from the Latin root of "strong", Fortive (NYSE:FTV) manufactures products and develops industrial software for numerous industries.

Why Is FTV Risky?

1. Core business is underperforming as its organic revenue has disappointed over the past two years, suggesting it might need acquisitions to stimulate growth
2. Projected sales growth of 2.1% for the next 12 months suggests sluggish demand
3. ROIC of 5.5% reflects management’s challenges in identifying attractive investment opportunities, and its falling returns suggest its earlier profit pools are drying up

Fortive is trading at $47.80 per share, or 17.7x forward P/E. Check out our free in-depth research report to learn more about why FTV doesn’t pass our bar.

High-Quality Stocks for All Market Conditions

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