Yahoo Finance

Wall Street has set ambitious price targets for the stocks in this article. While this suggests attractive upside potential, it’s important to remain skeptical because analysts face institutional pressures that can sometimes lead to overly optimistic forecasts.

Luckily for you, we at StockStory have no conflicts of interest - our sole job is to help you find genuinely promising companies. Keeping that in mind, here is one stock likely to meet or exceed Wall Street’s lofty expectations and two where analysts may be overlooking some important risks.

Two Stocks to Sell:

TEGNA (TGNA)

Consensus Price Target: $20.40 (27% implied return)

Spun out of Gannett in 2015, TEGNA (NYSE:TGNA) is a media company operating a network of television stations and digital platforms, focusing on local news and community content.

Why Are We Cautious About TGNA?

1. Annual revenue declines of 2.7% over the last two years indicate problems with its market positioning

2. Sales are projected to tank by 11.4% over the next 12 months as its demand continues evaporating

3. Free cash flow margin is forecasted to shrink by 9.4 percentage points in the coming year, suggesting the company will consume more capital to keep up with its competitors

TEGNA is trading at $16.06 per share, or 8.6x forward P/E. Check out our free in-depth research report to learn more about why TGNA doesn’t pass our bar.

American Woodmark (AMWD)

Consensus Price Target: $76.33 (28.8% implied return)

Starting as a small millwork shop, American Woodmark (NASDAQ:AMWD) is a cabinet manufacturing company that helps customers from inspiration to installation.

Why Are We Out on AMWD?

1. Products and services are facing significant end-market challenges during this cycle as sales have declined by 8.1% annually over the last two years

2. Earnings per share were flat over the last five years and fell short of the peer group average

3. Free cash flow margin shrank by 5.7 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive

At $59.26 per share, American Woodmark trades at 7.8x forward P/E. If you’re considering AMWD for your portfolio, see our FREE research report to learn more.

One Stock to Watch:

Energy Recovery (ERII)

Consensus Price Target: $19.67 (26.2% implied return)

Having saved far more than a trillion gallons of water, Energy Recovery (NASDAQ:ERII) provides energy recovery devices to the water treatment, oil and gas, and chemical processing sectors.

Why Should ERII Be on Your Watchlist?

1. Annual revenue growth of 10.8% over the past five years was outstanding, reflecting market share gains this cycle

2. Superior product capabilities and pricing power are reflected in its best-in-class gross margin of 69.7%

3. Earnings growth has massively outpaced its peers over the last two years as its EPS has compounded at 23.4% annually