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.

Whatever the consensus opinion may be, our team at StockStory cuts through the noise by conducting independent analysis to determine a company’s long-term prospects. Keeping that in mind, here are two stocks poised to prove Wall Street wrong and one where the skepticism is well-placed.

One Stock to Sell:

IPG Photonics (IPGP)

Consensus Price Target: $69 (2.4% implied return)

Both a designer and manufacturer of its products, IPG Photonics (NASDAQ:IPGP) is a provider of high-performance fiber lasers used for cutting, welding, and processing raw materials.

Why Should You Dump IPGP?

1. Products and services are facing significant end-market challenges during this cycle as sales have declined by 5.3% annually over the last five years

2. Operating profits fell over the last five years as its sales dropped and it struggled to adjust its fixed costs

3. Performance over the past five years shows each sale was less profitable as its earnings per share dropped by 19.8% annually, worse than its revenue

IPG Photonics’s stock price of $67.41 implies a valuation ratio of 41.4x forward P/E. Dive into our free research report to see why there are better opportunities than IPGP.

Two Stocks to Watch:

Xylem (XYL)

Consensus Price Target: $137.76 (8.3% implied return)

Formed through a spinoff, Xylem (NYSE:XYL) manufactures and services engineered products across a wide variety of applications primarily in the water sector.

Why Could XYL Be a Winner?

1. Impressive 22.8% annual revenue growth over the last two years indicates it’s winning market share this cycle

2. Operating margin improvement of 3.2 percentage points over the last five years demonstrates its ability to scale efficiently

3. Earnings growth has trumped its peers over the last two years as its EPS has compounded at 19.5% annually

Xylem is trading at $127.25 per share, or 26.4x forward P/E. Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.

Allison Transmission (ALSN)

Consensus Price Target: $102.50 (-2.4% implied return)

Helping build race cars at one point, Allison Transmission (NYSE:ALSN) offers transmissions to original equipment manufacturers and fleet operators.

Why Are We Positive On ALSN?

1. Superior product capabilities and pricing power result in a best-in-class gross margin of 47.7%

2. Disciplined cost controls and effective management resulted in a strong long-term operating margin of 28.8%, and its operating leverage amplified its profits over the last five years

3. Robust free cash flow margin of 20.2% gives it many options for capital deployment