1 Unpopular Stock that Deserves a Second Chance and 2 to Be Wary Of

DPZ Cover Image
1 Unpopular Stock that Deserves a Second Chance and 2 to Be Wary Of

In This Article:

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:

Domino's (DPZ)

Consensus Price Target: $509.26 (5.1% implied return)

Founded by two brothers in Michigan, Domino’s (NYSE:DPZ) is a globally recognized pizza chain known for its creative marketing and fast delivery.

Why Are We Wary of DPZ?

  1. Annual revenue growth of 5.2% over the last six years was below our standards for the restaurant sector

  2. Estimated sales growth of 5.8% for the next 12 months is soft and implies weaker demand

  3. Operating margin didn’t move over the last year, showing it couldn’t increase its efficiency

Domino's is trading at $484.35 per share, or 27.2x forward P/E. To fully understand why you should be careful with DPZ, check out our full research report (it’s free).

Boeing (BA)

Consensus Price Target: $210.53 (4.7% implied return)

One of the companies that forms a duopoly in the commercial aircraft market, Boeing (NYSE:BA) develops, manufactures, and services commercial airplanes, defense products, and space systems.

Why Is BA Risky?

  1. Cash-burning tendencies make us wonder if it can sustainably generate shareholder value

  2. Short cash runway increases the probability of a capital raise that dilutes existing shareholders

Boeing’s stock price of $201.04 implies a valuation ratio of 28.5x forward EV-to-EBITDA. If you’re considering BA for your portfolio, see our FREE research report to learn more.

One Stock to Buy:

AZEK (AZEK)

Consensus Price Target: $53.91 (10% implied return)

With a significant portion of its products made from recycled materials, AZEK (NYSE:AZEK) designs and manufactures goods for outdoor living spaces.

Why Are We Backing AZEK?

  1. Core business is healthy and doesn’t need acquisitions to boost sales as its organic revenue growth averaged 12.5% over the past two years

  2. Performance over the past two years was turbocharged by share buybacks, which enabled its earnings per share to grow faster than its revenue

  3. Free cash flow margin grew by 8.8 percentage points over the last five years, giving the company more chips to play with