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.
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 where the outlook is warranted and some alternatives with better fundamentals.
Donaldson (DCI)
Consensus Price Target: $72.40 (-2.2% implied return)
Playing a vital role in the historic Apollo 11 mission, Donaldson (NYSE: DCI) manufacturers and sells filtration equipment for various industries.
Why Does DCI Worry Us?
- Core business is underperforming as its organic revenue has disappointed over the past two years, suggesting it might need acquisitions to stimulate growth
- Demand will likely be soft over the next 12 months as Wall Street’s estimates imply tepid growth of 2.9%
- 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’s stock price of $74.06 implies a valuation ratio of 49.8x forward EV-to-EBITDA. Check out our free in-depth research report to learn more about why DCI doesn’t pass our bar.
Allegion (ALLE)
Consensus Price Target: $171.27 (2.1% implied return)
Allegion plc (NYSE: ALLE) is a provider of security products and solutions that keep people and assets safe and secure in various environments.
Why Does ALLE Give Us Pause?
- Organic sales performance over the past two years indicates the company may need to make strategic adjustments or rely on M&A to catalyze faster growth
- Free cash flow margin dropped by 2.7 percentage points over the last five years, implying the company became more capital intensive as competition picked up
- Waning returns on capital imply its previous profit engines are losing steam
Allegion is trading at $167.78 per share, or 20.7x forward P/E. Read our free research report to see why you should think twice about including ALLE in your portfolio.
Enact Holdings (ACT)
Consensus Price Target: $40 (7.3% implied return)
Playing a critical role in helping first-time homebuyers access the housing market, Enact Holdings (NASDAQ: ACT) provides private mortgage insurance that enables lenders to offer home loans with lower down payments while protecting against borrower defaults.
Why Do We Think Twice About ACT?
- Growth in insurance policies was lackluster over the last five years as its 1.3% annual growth underperformed the typical financial institution
- Costs have risen faster than its revenue over the last two years, causing its combined ratio to worsen by 15 percentage points
- Incremental sales over the last two years were less profitable as its 2.9% annual earnings per share growth lagged its revenue gains
At $37.28 per share, Enact Holdings trades at 1x forward P/B. To fully understand why you should be careful with ACT, check out our full research report (it’s free).
High-Quality Stocks for All Market Conditions
When Trump unveiled his aggressive tariff plan in April 2025, markets tanked as investors feared a full-blown trade war. But those who panicked and sold missed the subsequent rebound that’s already erased most losses.
Don’t let fear keep you from great opportunities and take a look at Top 5 Growth Stocks for this month. 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).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+782% 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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