1 Unpopular Stock That Deserves Some Love and 2 Facing Headwinds

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. That said, here is one stock where Wall Street’s pessimism is creating a buying opportunity and two where the outlook is warranted.

Two Stocks to Sell:

Edgewell Personal Care (EPC)

Consensus Price Target: $24.33 (7.4% 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. Organic sales performance over the past two years indicates the company may need to make strategic adjustments or rely on M&A to catalyze faster growth
2. Inability to adjust its cost structure while its revenue declined over the last year led to a 6.4 percentage point drop in the company’s operating margin
3. 6× net-debt-to-EBITDA ratio makes lenders less willing to extend additional capital, potentially necessitating dilutive equity offerings

At $22.67 per share, Edgewell Personal Care trades at 10.6x forward P/E. If you’re considering EPC for your portfolio, see our FREE research report to learn more.

International Paper (IP)

Consensus Price Target: $46.87 (10.1% implied return)

Established in 1898, International Paper (NYSE:IP) produces containerboard, pulp, paper, and materials used in packaging and printing applications.

Why Is IP Risky?

1. Annual sales growth of 3.9% over the last five years lagged behind its industrials peers as its large revenue base made it difficult to generate incremental demand
2. 7.4 percentage point decline in its free cash flow margin over the last five years reflects the company’s increased investments to defend its market position
3. Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions

International Paper’s stock price of $42.57 implies a valuation ratio of 26x forward P/E. Check out our free in-depth research report to learn more about why IP doesn’t pass our bar.

One Stock to Watch:

Cal-Maine (CALM)

Consensus Price Target: $87.75 (0.5% implied return)

Known for brands such as Egg-Land’s Best and Land O’ Lakes, Cal-Maine (NASDAQ:CALM) produces, packages, and distributes eggs.

Why Is CALM on Our Radar?

1. Annual revenue growth of 18.5% over the past three years was outstanding, reflecting market share gains
2. Performance over the past three years was turbocharged by share buybacks, which enabled its earnings per share to grow faster than its revenue
3. CALM is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders, and its improved cash conversion implies it’s becoming a less capital-intensive business

Cal-Maine is trading at $87.34 per share, or 27.8x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.

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