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. That said, here are three stocks where Wall Street’s enthusiasm may be misplaced and some other investments worth exploring instead.
Graphic Packaging Holding (GPK)
Consensus Price Target: $14.63 (28.8% implied return)
Founded in 1991, Graphic Packaging (NYSE: GPK) is a provider of paper-based packaging solutions for a wide range of products.
Why Is GPK Risky?
- Flat unit sales over the past two years imply it may need to invest in improvements to get back on track
- Sales are projected to tank by 1.7% over the next 12 months as its demand continues evaporating
- Earnings per share have contracted by 21.5% annually over the last two years, a headwind for returns as stock prices often echo long-term EPS performance
Graphic Packaging Holding is trading at $11.36 per share, or 11.9x forward P/E. If you’re considering GPK for your portfolio, see our FREE research report to learn more.
OneMain (OMF)
Consensus Price Target: $72.71 (34.3% implied return)
Dating back to 1912 and formerly known as Springleaf, OneMain Holdings (NYSE: OMF) provides personal loans, auto financing, and credit cards to nonprime consumers who have limited access to traditional banking services.
Why Do We Think Twice About OMF?
- 4.9% annual revenue growth over the last five years was slower than its financials peers
- Annual earnings per share growth of 1.8% underperformed its revenue over the last five years, showing its incremental sales were less profitable
- Elevated debt-to-equity ratio of 6.6× suggests the firm is overleveraged and may struggle to secure additional financing
At $54.15 per share, OneMain trades at 7.3x forward P/E. Read our free research report to see why you should think twice about including OMF in your portfolio.
Live Oak Bancshares (LOB)
Consensus Price Target: $44.75 (33.3% implied return)
Founded during the 2008 financial crisis with a vision to reimagine small business banking through technology, Live Oak Bancshares (NYSE: LOB) is a bank holding company that specializes in providing online banking services and SBA-guaranteed loans to small businesses across targeted industries nationwide.
Why Are We Hesitant About LOB?
- Weak unit economics are reflected in its net interest margin of 3.3%, one of the worst among bank companies
- Performance over the past two years shows its incremental sales were much less profitable, as its earnings per share fell by 6.4% annually
Live Oak Bancshares’s stock price of $33.57 implies a valuation ratio of 1.3x forward P/B. Dive into our free research report to see why there are better opportunities than LOB.
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