1 Unpopular Stock That Deserves Some Love and 2 Facing Headwinds

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.

Whatever the consensus opinion may be, our team at StockStory cuts through the noise by conducting independent analysis to determine a company’s long-term prospects. Keeping that in mind, here is one stock poised to prove Wall Street wrong and two facing legitimate challenges.

Two Stocks to Sell:

Cummins (CMI)

Consensus Price Target: $524.21 (0.2% implied return)

With more than half of the heavy-duty truck market using its engines at one point, Cummins (NYSE:CMI) offers engines and power systems.

Why Are We Hesitant About CMI?

1. Sales were flat over the last two years, indicating it’s failed to expand this cycle
2. Sales are projected to be flat over the next 12 months and imply weak demand
3. Waning returns on capital imply its previous profit engines are losing steam

Cummins’s stock price of $523.41 implies a valuation ratio of 21.9x forward P/E. If you’re considering CMI for your portfolio, see our FREE research report to learn more.

Hillenbrand (HI)

Consensus Price Target: $32 (0.5% implied return)

Hillenbrand, Inc. (NYSE: HI) is an industrial company that designs, manufactures, and sells highly engineered processing equipment and solutions for various industries.

Why Are We Out on HI?

1. Sales tumbled by 2.7% annually over the last two years, showing market trends are working against its favor during this cycle
2. Performance over the past five years shows its incremental sales were less profitable as its earnings per share were flat
3. Free cash flow margin dropped by 16.4 percentage points over the last five years, implying the company became more capital intensive as competition picked up

At $31.85 per share, Hillenbrand trades at 12.4x forward P/E. Check out our free in-depth research report to learn more about why HI doesn’t pass our bar.

One Stock to Buy:

JFrog (FROG)

Consensus Price Target: $69.22 (0.1% implied return)

Named after the amphibian that continuously evolves from egg to tadpole to adult, JFrog (NASDAQ:FROG) provides a platform that helps organizations securely create, store, manage, and distribute software packages across any system.

Why Is FROG a Good Business?

1. Billings growth has averaged 22.9% over the last year, indicating a healthy pipeline of new contracts that should drive future revenue increases
2. Software platform has product-market fit given the rapid recovery of its customer acquisition costs
3. FROG is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders

JFrog is trading at $69.18 per share, or 13.7x forward price-to-sales. Is now the time to initiate a position? Find out in our full research report, it’s free for active Edge members.

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