3 of Wall Street's Favorite Stocks Walking a Fine Line

The stocks in this article have caught Wall Street’s attention in a big way, with price targets implying returns above 20%. But investors should take these forecasts with a grain of salt because analysts typically say nice things about companies so their firms can win business in other product lines like M&A advisory.

At StockStory, we look beyond the headlines with our independent analysis to determine whether these bullish calls are justified. Keeping that in mind, here are three stocks where Wall Street may be overlooking some important risks and some alternatives with better fundamentals.

Leslie's (LESL)

Consensus Price Target: $2.12 (226% implied return)

Named after founder Philip Leslie, who established the company in 1963, Leslie’s (NASDAQ:LESL) is a retailer that sells pool and spa supplies, equipment, and maintenance services.

Why Are We Hesitant About LESL?

1. Weak same-store sales trends over the past two years suggest there may be few opportunities in its core markets to open new locations
2. Modest revenue base of $1.33 billion gives it less fixed cost leverage and fewer distribution channels than larger companies
3. High net-debt-to-EBITDA ratio of 10× increases the risk of forced asset sales or dilutive financing if operational performance weakens

Leslie’s stock price of $0.65 implies a valuation ratio of 9.9x forward price-to-earnings. To fully understand why you should be careful with LESL, check out our full research report (it’s free).

Genco (GNK)

Consensus Price Target: $19.41 (50.7% implied return)

Headquartered in NYC, Genco (NYSE:GNK) is a shipping company that transports dry bulk cargo along worldwide maritime routes.

Why Are We Cautious About GNK?

1. Performance surrounding its owned vessels has lagged its peers
2. Forecasted revenue decline of 17.1% for the upcoming 12 months implies demand will fall even further
3. Issuance of new shares over the last two years caused its earnings per share to fall by 34.7% annually, even worse than its revenue declines

At $12.88 per share, Genco trades at 17.8x forward price-to-earnings. Check out our free in-depth research report to learn more about why GNK doesn’t pass our bar.

Proto Labs (PRLB)

Consensus Price Target: $44.33 (25.3% implied return)

Pioneering the concept of online quoting and manufacturing for custom prototypes and low-volume production parts, Proto Labs (NYSE:PRLB) offers injection molding, 3D printing, and sheet metal fabrication for manufacturers in various industries.

Why Are We Out on PRLB?

1. 1.3% annual revenue growth over the last two years was slower than its industrials peers
2. Expenses have increased as a percentage of revenue over the last five years as its operating margin fell by 9.8 percentage points
3. Incremental sales over the last five years were much less profitable as its earnings per share fell by 10.1% annually while its revenue grew

Proto Labs is trading at $35.39 per share, or 23.6x forward price-to-earnings. Dive into our free research report to see why there are better opportunities than PRLB.

Stocks We Like More

Market indices reached historic highs following Donald Trump’s presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth.

While this has caused many investors to adopt a "fearful" wait-and-see approach, we’re leaning into our best ideas that can grow regardless of the political or macroeconomic climate. Take advantage of Mr. Market by checking out our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.

Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Axon (+711% five-year return). Find your next big winner with StockStory today for free.