When Wall Street turns bearish on a stock, it’s worth paying attention. These calls stand out because analysts rarely issue grim ratings on companies for fear their firms will lose out in other business lines such as M&A advisory.
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:
Enact Holdings (ACT)
Consensus Price Target: $45.80 (8.2% 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 Is ACT Risky?
- Insurance offerings faced market headwinds this cycle, reflected in stagnant net premiums earned over the last five years
- Projected sales are flat for the next 12 months, implying demand will slow from its two-year trend
- Earnings growth over the last two years fell short of the peer group average as its EPS only increased by 6.7% annually
Enact Holdings’s stock price of $42.33 implies a valuation ratio of 1x forward P/B. To fully understand why you should be careful with ACT, check out our full research report (it’s free).
Preferred Bank (PFBC)
Consensus Price Target: $103.75 (8.5% implied return)
Founded in 1991 with a focus on serving the Pacific Rim community in Southern California, Preferred Bank (NASDAQ:PFBC) is a commercial bank that provides banking products and services to small and mid-sized businesses, entrepreneurs, real estate developers, and high net worth individuals.
Why Do We Think Twice About PFBC?
- Muted 9% annual net interest income growth over the last five years shows its demand lagged behind its banking peers
- Net interest margin shrank by 61.7 basis points (100 basis points = 1 percentage point) over the last two years, suggesting the profitability of its loan book is decreasing or the market is becoming more competitive
- Earnings growth underperformed the sector average over the last two years as its EPS grew by just 1.3% annually
Preferred Bank is trading at $95.66 per share, or 1.3x forward P/B. Check out our free in-depth research report to learn more about why PFBC doesn’t pass our bar.
One Stock to Buy:
EMCOR (EME)
Consensus Price Target: $983.50 (4.1% implied return)
Through its network of over 70 subsidiaries, EMCOR (NYSE:EME) provides electrical, mechanical, and building construction and services
Why Should You Buy EME?
- Annual revenue growth of 16.3% over the last two years was superb and indicates its market share increased during this cycle
- Performance over the past two years was turbocharged by share buybacks, which enabled its earnings per share to grow faster than its revenue
- Rising returns on capital show management is finding more attractive investment opportunities
At $945.00 per share, EMCOR trades at 30.7x forward P/E. Is now the time to initiate a position? See for yourself in our in-depth research report, it’s free.
Stocks We Like Even More
ONE MORE THING: Top 6 Stocks for This Week. This market is separating quality stocks from expensive ones fast. AI taking down whole sectors with no warning. In a rotation this fast, you need more than a list of good companies.
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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-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today.