1 of Wall Street’s Favorite Stocks for Long-Term Investors and 2 Facing Challenges
The stocks in this article have caught Wall Street’s attention in a big way, with price targets implying returns above 20%. But investors should take these forecasts with a grain of salt because analysts typically say nice things about companies so their firms can win business in other product lines like M&A advisory.
Unlike the investment banks, we created StockStory to provide independent analysis that helps you determine which companies are truly worth following. That said, here is one stock likely to meet or exceed Wall Street’s lofty expectations and two where consensus estimates seem disconnected from reality.
Two Stocks to Sell: Ladder Capital (LADR)
Consensus Price Target: $12 (20.8% implied return)
Founded during the 2008 financial crisis when traditional lenders retreated from commercial real estate, Ladder Capital (NYSE:LADR) is a real estate investment trust that originates commercial real estate loans, owns commercial properties, and invests in real estate securities.
Why Does LADR Fall Short?
Products and services are facing significant end-market challenges during this cycle as sales have declined by 8.8% annually over the last two years
Earnings per share decreased by more than its revenue over the last two years, showing each sale was less profitable
Flat tangible book value per share over the last five years suggests it must find different ways to enhance shareholder value during this cycle
At $9.94 per share, Ladder Capital trades at 0.9x forward P/B. If you’re considering LADR for your portfolio, see our FREE research report to learn more.
Martin Marietta Materials (MLM)
Consensus Price Target: $663.74 (19.9% implied return)
Operating one of North America’s largest networks of quarries, including 14 underground mines, Martin Marietta Materials (NYSE:MLM) is a natural resource-based building materials company that supplies aggregates, cement, and other construction materials for infrastructure and building projects.
Why Are We Hesitant About MLM?
Sales stagnated over the last two years and signal the need for new growth strategies
Flat earnings per share over the last two years underperformed the sector average
Low returns on capital reflect management’s struggle to allocate funds effectively, and its decreasing returns suggest its historical profit centers are aging
Martin Marietta Materials’s stock price of $553.77 implies a valuation ratio of 27.9x forward P/E. To fully understand why you should be careful with MLM, check out our full research report (it’s free).