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.
At StockStory, we look beyond the headlines with our independent analysis to determine whether these bearish calls are justified. That said, here is one stock poised to prove Wall Street wrong and two where the skepticism is well-placed.
Two Stocks to Sell:
Donaldson (DCI)
Consensus Price Target: $72.40 (4.1% implied return)
Playing a vital role in the historic Apollo 11 mission, Donaldson (NYSE: DCI) manufacturers and sells filtration equipment for various industries.
Why Is DCI Not Exciting?
- Absence of organic revenue growth over the past two years suggests it may have to lean into acquisitions to drive its expansion
- Demand will likely be soft over the next 12 months as Wall Street’s estimates imply tepid growth of 2.8%
- Free cash flow margin shrank by 5.5 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
Donaldson is trading at $69.57 per share, or 46.7x forward EV-to-EBITDA. Check out our free in-depth research report to learn more about why DCI doesn’t pass our bar.
CoStar (CSGP)
Consensus Price Target: $88.47 (10.6% implied return)
With a research department that makes over 10,000 property updates daily to its 35-year-old database, CoStar Group (NASDAQ: CSGP) provides comprehensive real estate data, analytics, and online marketplaces for commercial and residential properties in the U.S. and U.K.
Why Does CSGP Worry Us?
- Efficiency has decreased over the last five years as its adjusted operating margin fell by 23.7 percentage points
- Earnings per share fell by 4% annually over the last five years while its revenue grew, showing its incremental sales were much less profitable
- 16.6 percentage point decline in its free cash flow margin over the last five years reflects the company’s increased investments to defend its market position
CoStar’s stock price of $80 implies a valuation ratio of 76x forward P/E. If you’re considering CSGP for your portfolio, see our FREE research report to learn more.
One Stock to Watch:
ITT (ITT)
Consensus Price Target: $169.50 (8.1% implied return)
Playing a crucial role in the development of the first transatlantic television transmission in 1956, ITT (NYSE: ITT) provides motion and fluid handling equipment for various industries
Why Is ITT Interesting?
- Operating margin expanded by 9.6 percentage points over the last five years as it scaled and became more efficient
- Performance over the past two years was boosted by share buybacks, which enabled its earnings per share to grow faster than its revenue
- ROIC punches in at 17.5%, illustrating management’s expertise in identifying profitable investments, and its rising returns show it’s making even more lucrative bets
At $156.87 per share, ITT trades at 24.2x forward P/E. Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.
High-Quality Stocks for All Market Conditions
Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.
While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like our Top 5 Strong Momentum Stocks for this week. 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).
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