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.
Accurately determining a company’s long-term prospects isn’t easy, especially when sentiment is weak. That’s where StockStory comes in - to help you find attractive investment candidates backed by unbiased research. That said, here is one stock poised to prove Wall Street wrong and two where the outlook is warranted.
Two Stocks to Sell:
Himax (HIMX)
Consensus Price Target: $9.94 (9% implied return)
Taiwan-based Himax Technologies (NASDAQ: HIMX) is a leading manufacturer of display driver chips and timing controllers used in TVs, laptops, and mobile phones.
Why Does HIMX Fall Short?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 5.9% annually over the last two years
- Projected sales decline of 7.1% over the next 12 months indicates demand will continue deteriorating
- Substandard operating margin profitability and its deterioration over the last five years limit its responsiveness to unforeseen market trends
Himax’s stock price of $9.12 implies a valuation ratio of 26.3x forward P/E. Check out our free in-depth research report to learn more about why HIMX doesn’t pass our bar.
Mercury Systems (MRCY)
Consensus Price Target: $47.75 (-5.3% implied return)
Founded in 1981, Mercury Systems (NASDAQ: MRCY) specializes in providing processing subsystems and components for primarily defense applications.
Why Do We Think MRCY Will Underperform?
- Absence of organic revenue growth over the past two years suggests it may have to lean into acquisitions to drive its expansion
- Revenue growth over the past five years was nullified by the company’s new share issuances as its earnings per share fell by 28% annually
- Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
At $50.44 per share, Mercury Systems trades at 71.4x forward P/E. To fully understand why you should be careful with MRCY, check out our full research report (it’s free).
One Stock to Watch:
Trupanion (TRUP)
Consensus Price Target: $52.25 (-5.4% implied return)
Born from a vision to help pet owners avoid economic euthanasia when faced with expensive veterinary bills, Trupanion (NASDAQ: TRUP) provides medical insurance for cats and dogs through data-driven, vertically-integrated products priced specifically for each pet's unique characteristics.
Why Is TRUP Interesting?
- Market share has increased this cycle as its 17.6% annual revenue growth over the last two years was exceptional
- Incremental sales over the last two years have been highly profitable as its earnings per share increased by 94.6% annually, topping its revenue gains
- Balance sheet strength has increased this cycle as its 14.9% annual book value per share growth over the last five years was exceptional
Trupanion is trading at $55.25 per share, or 6.9x forward P/B. Is now the right time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.
While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio by checking out our Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today
