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.

Whatever the consensus opinion may be, our team at StockStory cuts through the noise by conducting independent analysis to determine a company’s long-term prospects. Keeping that in mind, here are three stocks where the outlook is warranted and some alternatives with better fundamentals.

Alarm.com (ALRM)

Consensus price target: $63 (-2.5% implied return)

Processing over 325 billion data points annually from more than 150 million connected devices, Alarm.com (NASDAQ:ALRM) provides cloud-based platforms that enable residential and commercial property owners to remotely monitor and control their security, video, energy, and other connected devices.

Why Are We Out on ALRM?

1. Customers had second thoughts about committing to its platform over the last year as its average billings growth of 8.7% underwhelmed
2. Estimated sales growth of 4% for the next 12 months implies demand will slow from its two-year trend
3. Static operating margin over the last year shows it couldn’t become more efficient

Alarm.com’s stock price of $64.59 implies a valuation ratio of 3.2x forward price-to-sales. Dive into our free research report to see why there are better opportunities than ALRM.

The Toro Company (TTC)

Consensus price target: $111 (5.3% implied return)

Ceasing all production to support the war effort during World War II, Toro (NYSE:TTC) offers outdoor equipment for residential, commercial, and agricultural use.

Why Are We Cautious About TTC?

1. Annual revenue growth of 2.9% over the last two years was below our standards for the industrials sector
2. Estimated sales growth of 3% for the next 12 months is soft and implies weaker demand
3. Eroding returns on capital suggest its historical profit centers are aging

The Toro Company is trading at $105.45 per share, or 21.3x forward P/E. If you’re considering TTC for your portfolio, see our FREE research report to learn more.

Preferred Bank (PFBC)

Consensus price target: $116.50 (9.8% implied return)

Founded in 1991 with a focus on serving the Pacific Rim community in Southern California, Preferred Bank (NASDAQ:PFBC) is a commercial bank that provides banking products and services to small and mid-sized businesses, entrepreneurs, real estate developers, and high net worth individuals.

Why Do We Think Twice About PFBC?

1. Annual net interest income growth of 8.3% over the last five years was below our standards for the banking sector
2. 45.1 basis point (100 basis points = 1 percentage point) decline in its net interest margin over the last two years reflects the firm’s willingness to accept lower profitability to defend its market position
3. Earnings growth over the last two years fell short of the peer group average as its EPS only increased by 3.9% annually

At $106.15 per share, Preferred Bank trades at 1.5x forward P/B. Check out our free in-depth research report to learn more about why PFBC doesn’t pass our bar.

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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.