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.
At StockStory, we look beyond the headlines with our independent analysis to determine whether these bullish calls are justified. That said, here is one stock where Wall Street’s positive outlook is supported by strong fundamentals and two where consensus estimates seem disconnected from reality.
Two Stocks to Sell:
RXO (RXO)
Consensus Price Target: $24.56 (24.2% implied return)
With access to millions of trucks, RXO (NYSE: RXO) offers full-truckload, less-than-truckload, and last-mile deliveries.
Why Should You Sell RXO?
- Declining unit sales over the past two years show it’s struggled to increase its sales volumes and had to rely on price increases
- Free cash flow margin dropped by 5.3 percentage points over the last five years, implying the company became more capital intensive as competition picked up
- Short cash runway increases the probability of a capital raise that dilutes existing shareholders
RXO is trading at $19.77 per share, or 60.4x forward P/E. If you’re considering RXO for your portfolio, see our FREE research report to learn more.
Resideo (REZI)
Consensus Price Target: $34.25 (85.4% implied return)
Resideo Technologies, Inc. (NYSE: REZI) is a manufacturer and distributor of technology-driven products and solutions for home comfort, energy management, water management, and safety and security.
Why Do We Steer Clear of REZI?
- Muted 5.8% annual revenue growth over the last five years shows its demand lagged behind its industrials peers
- Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 20.6 percentage points
- Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability
At $18.47 per share, Resideo trades at 9.8x forward P/E. Read our free research report to see why you should think twice about including REZI in your portfolio.
One Stock to Buy:
Arthur J. Gallagher (AJG)
Consensus Price Target: $289.67 (27.2% implied return)
Founded in 1927 and operating in approximately 130 countries through direct operations and correspondent networks, Arthur J. Gallagher (NYSE: AJG) provides insurance brokerage, reinsurance, consulting, and third-party claims settlement services to businesses and individuals worldwide.
Why Is AJG a Good Business?
- Annual revenue growth of 20% over the last two years was superb and indicates its market share increased during this cycle
- Earnings growth has trumped its peers over the last five years as its EPS has compounded at 18.5% annually
- Robust free cash flow margin of 17.3% gives it many options for capital deployment
Arthur J. Gallagher’s stock price of $227.70 implies a valuation ratio of 16.2x forward P/E. Is now the right time to buy? See for yourself in our comprehensive research report, it’s free.
High-Quality Stocks for All Market Conditions
ONE MORE THING: Top 5 Growth Stocks. The biggest stock winners almost always had one thing in common before they ran. Revenue growing like crazy. Meta. CrowdStrike. Broadcom. Our AI flagged all three. They returned 315%, 314%, and 455%, respectively.
Find out which 5 stocks it’s flagging this month — FREE. Get Our Top 5 Growth Stocks for Free HERE.
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+271% between June 2020 and June 2025). Find your next big winner with StockStory today.
