3 Unpopular Stocks Walking a Fine Line

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.

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.

Edgewell Personal Care (EPC)

Consensus Price Target: $26 (10.3% implied return)

Boasting brands such as Banana Boat, Schick, and Skintimate, Edgewell Personal Care (NYSE:EPC) sells personal care products in the skin and sun care, shave, and feminine care categories.

Why Do We Avoid EPC?

1. Absence of organic revenue growth over the past two years suggests it may have to lean into acquisitions to drive its expansion
2. Sales over the last three years were less profitable as its earnings per share fell by 2.6% annually while its revenue was flat
3. Free cash flow margin shrank by 4.9 percentage points over the last year, suggesting the company is consuming more capital to stay competitive

Edgewell Personal Care’s stock price of $23.58 implies a valuation ratio of 7.4x forward P/E. Read our free research report to see why you should think twice about including EPC in your portfolio.

Arrow Electronics (ARW)

Consensus Price Target: $116.75 (-7.9% implied return)

Founded as a single retail store, Arrow Electronics (NYSE:ARW) provides electronic components and enterprise computing solutions to businesses globally.

Why Do We Think ARW Will Underperform?

1. Products and services are facing significant end-market challenges during this cycle as sales have declined by 10.8% annually over the last two years
2. Sales were less profitable over the last two years as its earnings per share fell by 32.9% annually, worse than its revenue declines
3. Waning returns on capital imply its previous profit engines are losing steam

Arrow Electronics is trading at $126.70 per share, or 5.1x forward EV-to-EBITDA. Dive into our free research report to see why there are better opportunities than ARW.

Invesco (IVZ)

Consensus Price Target: $22.58 (2.6% implied return)

With roots dating back to 1935 when it pioneered the first mutual fund with an objective of capital growth, Invesco (NYSE:IVZ) is a global asset management firm that offers investment solutions across equities, fixed income, alternatives, and multi-asset strategies.

Why Are We Out on IVZ?

1. Customers postponed purchases of its products and services this cycle as its revenue declined by 2.4% annually over the last five years
2. Falling earnings per share over the last five years has some investors worried as stock prices ultimately follow EPS over the long term
3. ROE of 5.8% reflects management’s challenges in identifying attractive investment opportunities

At $22.02 per share, Invesco trades at 11.4x forward P/E. If you’re considering IVZ for your portfolio, see our FREE research report to learn more.

Stocks We Like More

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