Radek Strnad
3 min read
The past year hasn’t been kind to the stocks featured in this article. Each has tumbled to its lowest point in 12 months, leaving investors to decide whether they’re witnessing fire sales or falling knives.
At StockStory, we dig beneath the surface of price movements to uncover whether a company’s fundamentals justify its current valuation or suggest hidden potential. That said, here is one stock where the poor sentiment is creating a buying opportunity and two where the skepticism is well-placed.
Two Stocks to Sell:
Lowe’s (LOW)
One-Month Return: -8.2%
Founded in North Carolina as Lowe’s North Wilkesboro Hardware, the company is a home improvement retailer that sells everything from paint to tools to building materials.
Why Does LOW Worry Us?
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Products have few die-hard fans as sales have declined by 2.6% annually over the last three years
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Weak same-store sales trends over the past two years suggest there may be few opportunities in its core markets to open new locations
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Gross margin of 33.3% is below its competitors, leaving less money for marketing and promotions
At $210.52 per share, Lowe’s trades at 16.3x forward P/E. Read our free research report to see why you should think twice about including LOW in your portfolio, it’s free.
Shake Shack (SHAK)
One-Month Return: -25.6%
Started as a hot dog cart in New York City’s Madison Square Park, Shake Shack (NYSE:SHAK) is a fast-food restaurant known for its burgers and milkshakes.
Why Do We Think Twice About SHAK?
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Operating margin of 2.3% falls short of the industry average, and the smaller profit dollars make it harder to react to unexpected market developments
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Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital
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ROIC of -0.3% reflects management’s challenges in identifying attractive investment opportunities
Shake Shack is trading at $52.21 per share, or 44.3x forward P/E. To fully understand why you should be careful with SHAK, check out our full research report (it’s free).
One Stock to Watch:
Celsius (CELH)
One-Month Return: -12.6%
With its proprietary MetaPlus formula as the basis for key products, Celsius (NASDAQ:CELH) offers energy drinks that feature natural ingredients to help in fitness and weight management.
Why Are We Fans of CELH?
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Remarkable 56.1% revenue growth over the last three years demonstrates its ability to capture significant market share
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Unique products and pricing power are reflected in its stellar gross margin of 50.4%
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Earnings growth has trumped its peers over the last three years as its EPS has compounded at 215% annually
