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When Wall Street turns bearish on a stock, it’s worth paying attention. These calls stand out because analysts rarely issue grim ratings on companies for fear their firms will lose out in other business lines such as M&A advisory.

Accurately determining a company’s long-term prospects isn’t easy, especially when sentiment is weak. That’s where StockStory comes in - to help you find attractive investment candidates backed by unbiased research. Keeping that in mind, here are three stocks where the outlook is warranted and some alternatives with better fundamentals.

DocuSign (DOCU)

Consensus Price Target: $91.74 (1.1% implied return)

Founded by Seattle-based entrepreneur Tom Gonser, DocuSign (NASDAQ:DOCU) is the pioneer of e-signature and offers software as a service that allows people and organisations to sign legally binding documents electronically.

Why Are We Hesitant About DOCU?

1. Customers had second thoughts about committing to its platform over the last year as its average billings growth of 6.6% underwhelmed

2. Net revenue retention rate of 99.8% shows it has a tough time retaining customers

3. Extended payback periods on sales investments suggest the company’s platform isn’t resonating enough to drive efficient sales conversions

DocuSign’s stock price of $90.72 implies a valuation ratio of 6.3x forward price-to-sales. Check out our free in-depth research report to learn more about why DOCU doesn’t pass our bar.

Guidewire (GWRE)

Consensus Price Target: $210.72 (-1.5% implied return)

Founded by two individuals involved in the development of leading procurement software Ariba, Guidewire (NYSE:GWRE) offers insurance companies a software-as-a-service platform to help sell their products and manage their workflows.

Why Is GWRE Not Exciting?

1. Sales trends were unexciting over the last three years as its 12.4% annual growth was below the typical software company

2. High servicing costs result in a relatively inferior gross margin of 61.4% that must be offset through increased usage

3. Extended payback periods on sales investments suggest the company’s platform isn’t resonating enough to drive efficient sales conversions

Guidewire is trading at $213.99 per share, or 14.5x forward price-to-sales. If you’re considering GWRE for your portfolio, see our FREE research report to learn more.

Sherwin-Williams (SHW)

Consensus Price Target: $377.75 (4.1% implied return)

Widely known for its success in the paint industry, Sherwin-Williams (NYSE:SHW) is a manufacturer of paints, coatings, and related products.

Why Does SHW Give Us Pause?

1. Absence of organic revenue growth over the past two years suggests it may have to lean into acquisitions to drive its expansion

2. Anticipated sales growth of 2.5% for the next year implies demand will be shaky

3. Free cash flow margin shrank by 8.5 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive