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. Keeping that in mind, here are three stocks facing legitimate challenges and some alternatives worth exploring instead.
American Eagle (AEO)
Consensus Price Target: $23.11 (-9% implied return)
With a heavy focus on denim, American Eagle Outfitters (NYSE: AEO) is a specialty retailer offering an assortment of apparel and accessories to young adults.
Why Are We Hesitant About AEO?
- Annual revenue growth of 2.2% over the last three years was below our standards for the consumer retail sector
- Lack of new stores puts a ceiling on its growth and reflects a focus on optimizing sales at existing locations
- ROIC of 9% reflects management’s challenges in identifying attractive investment opportunities, and its shrinking returns suggest its past profit sources are losing steam
American Eagle is trading at $25.40 per share, or 15.9x forward P/E. Dive into our free research report to see why there are better opportunities than AEO.
Hartford (HIG)
Consensus Price Target: $142.42 (4.5% implied return)
Recognizable by its iconic stag logo that dates back to 1810, The Hartford (NYSE: HIG) provides property and casualty insurance, group benefits, and investment products to individuals and businesses across the United States.
Why Does HIG Give Us Pause?
- Net premiums earned only expanded by 6.1% annually over the last five years, trailing its insurance peers as its scale limited incremental business
- Projected sales decline of 22.5% for the next 12 months points to a tough demand environment ahead
- Sizable asset base leads to capital growth challenges as its 5.8% annual book value per share increases over the last five years fell short of other insurance companies
At $136.27 per share, Hartford trades at 2.1x forward P/B. If you’re considering HIG for your portfolio, see our FREE research report to learn more.
Prosperity Bancshares (PB)
Consensus Price Target: $78.47 (7.7% implied return)
With a network of banking centers spanning the Lone Star State and beyond, Prosperity Bancshares (NYSE: PB) operates full-service banking locations throughout Texas and Oklahoma, offering a wide range of financial products and services to businesses and consumers.
Why Do We Steer Clear of PB?
- Annual revenue growth of 1.6% over the last five years was below our standards for the banking sector
- Annual net interest income growth of 1.3% over the last five years was below our standards for the banking sector
- Earnings per share were flat over the last five years while its revenue grew, showing its incremental sales were less profitable
Prosperity Bancshares’s stock price of $72.83 implies a valuation ratio of 0.9x forward P/B. To fully understand why you should be careful with PB, check out our full research report (it’s free for active Edge members).
Stocks We Like More
If your portfolio success hinges on just 4 stocks, your wealth is built on fragile ground. You have a small window to secure high-quality assets before the market widens and these prices disappear.
Don’t wait for the next volatility shock. Check out our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% 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
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