1 of Wall Street's Favorite Stock for Long-Term Investors and 2 We Ignore

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 is one stock where Wall Street’s positive outlook is supported by strong fundamentals and two where consensus estimates seem disconnected from reality.

Two Stocks to Sell:

Alarm.com (ALRM)

Consensus Price Target: $68.71 (34.8% implied return)

Processing over 325 billion data points annually from more than 150 million connected devices, Alarm.com (NASDAQ:ALRM) provides cloud-based platforms that enable residential and commercial property owners to remotely monitor and control their security, video, energy, and other connected devices.

Why Are We Out on ALRM?

1. Average billings growth of 7.4% over the last year was subpar, suggesting it struggled to push its software and might have to lower prices to stimulate demand
2. Estimated sales growth of 3.7% for the next 12 months implies demand will slow from its two-year trend
3. Operating margin improvement of 3.3 percentage points over the last year demonstrates its ability to scale efficiently

Alarm.com is trading at $50.99 per share, or 3x forward price-to-sales. Check out our free in-depth research report to learn more about why ALRM doesn’t pass our bar.

Constellation Brands (STZ)

Consensus Price Target: $172.61 (23.4% implied return)

With a presence in more than 100 countries, Constellation Brands (NYSE:STZ) is a globally renowned producer and marketer of beer, wine, and spirits.

Why Do We Think Twice About STZ?

1. 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
2. Estimated sales decline of 6.1% for the next 12 months implies an even more challenging demand environment
3. Below-average returns on capital indicate management struggled to find compelling investment opportunities, and its shrinking returns suggest its past profit sources are losing steam

At $139.89 per share, Constellation Brands trades at 11.7x forward P/E. To fully understand why you should be careful with STZ, check out our full research report (it’s free for active Edge members).

One Stock to Watch:

Enterprise Financial Services (EFSC)

Consensus Price Target: $67 (24% implied return)

Starting as a single bank in Missouri in 1988 and expanding through strategic growth, Enterprise Financial Services (NASDAQ:EFSC) is a financial holding company that offers banking, lending, and wealth management services to businesses and individuals across seven states.

Why Does EFSC Stand Out?

1. Annual net interest income growth of 18.4% over the past five years was outstanding, reflecting market share gains this cycle
2. Earnings growth has massively outpaced its peers over the last five years as its EPS has compounded at 14.8% annually
3. Balance sheet strength has increased this cycle as its 10.6% annual tangible book value per share growth over the last five years was exceptional

Enterprise Financial Services’s stock price of $54.03 implies a valuation ratio of 1x forward P/B. Is now the right time to buy? See for yourself in our comprehensive research report, it’s free for active Edge members .

High-Quality Stocks for All Market Conditions

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