1 Unpopular Stock That Deserves a Second Chance and 2 We Avoid

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.

At StockStory, we look beyond the headlines with our independent analysis to determine whether these bearish calls are justified. Keeping that in mind, here is one stock poised to prove Wall Street wrong and two where the outlook is warranted.

Two Stocks to Sell:

Rockwell Automation (ROK)

Consensus Price Target: $349.04 (0.1% implied return)

One of the first companies to address industrial automation, Rockwell Automation (NYSE:ROK) sells products that help customers extract more efficiency from their machinery.

Why Do We Avoid ROK?

1. Absence of organic revenue growth over the past two years suggests it may have to lean into acquisitions to drive its expansion
2. Performance over the past two years shows each sale was less profitable as its earnings per share dropped by 8.9% annually, worse than its revenue
3. Waning returns on capital imply its previous profit engines are losing steam

At $348.56 per share, Rockwell Automation trades at 30.7x forward P/E. Read our free research report to see why you should think twice about including ROK in your portfolio.

NVR (NVR)

Consensus Price Target: $8,283 (1.3% implied return)

Known for its unique land acquisition strategy, NVR (NYSE:NVR) is a respected homebuilder and mortgage company in the United States.

Why Do We Think Twice About NVR?

1. New orders were hard to come by as its average backlog growth of 1.3% over the past two years underwhelmed
2. Forecasted revenue decline of 6.9% for the upcoming 12 months implies demand will fall off a cliff
3. Waning returns on capital imply its previous profit engines are losing steam

NVR’s stock price of $8,178 implies a valuation ratio of 19.1x forward P/E. If you’re considering NVR for your portfolio, see our FREE research report to learn more.

One Stock to Watch:

TJX (TJX)

Consensus Price Target: $149.44 (6.7% implied return)

Initially based on a strategy of buying excess inventory from manufacturers or other retailers, TJX (NYSE:TJX) is an off-price retailer that sells brand-name apparel and other goods at prices much lower than department stores.

Why Is TJX on Our Radar?

1. Brick-and-mortar locations are witnessing elevated demand as their same-store sales growth averaged 4.1% over the past two years
2. Enormous revenue base of $57.93 billion compensates for its low gross margin and provides significant leverage in supplier negotiations
3. Industry-leading 27.9% return on capital demonstrates management’s skill in finding high-return investments, and its returns are growing as it capitalizes on even better market opportunities

TJX is trading at $140 per share, or 30x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.

High-Quality Stocks for All Market Conditions

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