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Wall Street has issued downbeat forecasts for the stocks in this article. These predictions are rare - financial institutions typically hesitate to say bad things about a company because it can jeopardize their other revenue-generating business lines like 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 are three stocks facing legitimate challenges and some alternatives worth exploring instead.

American Eagle (AEO)

Consensus Price Target: $12 (11.6% implied return)

With a heavy focus on denim, American Eagle Outfitters (NYSE:AEO) is a specialty retailer offering an assortment of apparel and accessories to young adults.

Why Are We Cautious About AEO?

1. Lackluster 4.3% annual revenue growth over the last five years indicates the company is losing ground to competitors

2. Estimated sales decline of 2.7% for the next 12 months implies a challenging demand environment

3. Underwhelming 2.6% return on capital reflects management’s difficulties in finding profitable growth opportunities

At $10.75 per share, American Eagle trades at 6x forward P/E. Check out our free in-depth research report to learn more about why AEO doesn’t pass our bar.

Hormel Foods (HRL)

Consensus Price Target: $32.02 (7.8% implied return)

Best known for its SPAM brand, Hormel (NYSE:HRL) is a packaged foods company with products that span meat, poultry, shelf-stable foods, and spreads.

Why Does HRL Worry Us?

1. Declining unit sales over the past two years show it’s struggled to move its products and had to rely on price increases

2. Easily substituted products (and therefore stiff competition) result in an inferior gross margin of 16.7% that must be offset through higher volumes

3. Sales over the last three years were less profitable as its earnings per share fell by 4.8% annually while its revenue was flat

Hormel Foods’s stock price of $29.71 implies a valuation ratio of 17.2x forward P/E. If you’re considering HRL for your portfolio, see our FREE research report to learn more.

NVR (NVR)

Consensus Price Target: $7,700 (8.8% implied return)

Known for its unique land acquisition strategy, NVR (NYSE:NVR) is a respected homebuilder and mortgage company in the United States.

Why Do We Think Twice About NVR?

1. Average backlog growth of 1.5% over the past two years was mediocre and suggests fewer customers signed long-term contracts

2. Sales are projected to tank by 8.2% over the next 12 months as demand evaporates

3. Earnings per share lagged its peers over the last two years as they only grew by 1.1% annually