Wall Street’s bearish price targets for the stocks in this article signal serious concerns. Such forecasts are uncommon in an industry where maintaining cordial corporate relationships often trumps delivering the hard truth.

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 facing legitimate challenges and some alternatives worth exploring instead.

CTS (CTS)

Consensus Price Target: $54 (-1.8% implied return)

With roots dating back to 1896 and a global manufacturing footprint, CTS (NYSE: CTS) designs and manufactures sensors, connectivity components, and actuators for aerospace, defense, industrial, medical, and transportation markets.

Why Does CTS Fall Short?

1. Products and services are facing end-market challenges during this cycle, as seen in its flat sales over the last two years
2. Earnings per share were flat over the last two years and fell short of the peer group average
3. Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability

CTS’s stock price of $54.97 implies a valuation ratio of 22.2x forward P/E. To fully understand why you should be careful with CTS, check out our full research report (it’s free).

Byline Bancorp (BY)

Consensus Price Target: $35.60 (7.4% implied return)

Ranking as the fifth most active Small Business Administration lender in the country, Byline Bancorp (NYSE: BY) is a Chicago-based bank that provides banking services to small and medium-sized businesses, commercial real estate developers, and consumers.

Why Are We Cautious About BY?

1. Sales trends were unexciting over the last two years as its 7.4% annual growth was below the typical banking company
2. Estimated net interest income growth of 4.5% for the next 12 months implies demand will slow from its five-year trend
3. Performance over the past two years shows its incremental sales were less profitable, as its 2.4% annual earnings per share growth trailed its revenue gains

Byline Bancorp is trading at $33.14 per share, or 1.1x forward P/B. Read our free research report to see why you should think twice about including BY in your portfolio.

Washington Trust Bancorp (WASH)

Consensus Price Target: $35 (-1.9% implied return)

Founded in 1800 and operating as Rhode Island's oldest community bank, Washington Trust Bancorp (NASDAQ: WASH) is a regional bank holding company offering commercial banking, mortgage lending, personal banking, and wealth management services.

Why Should You Sell WASH?

1. Annual net interest income growth of 3.7% over the last five years was below our standards for the banking sector
2. Net interest margin of 2.2% reflects its high servicing and capital costs
3. Sales over the last five years were less profitable as its earnings per share fell by 7.8% annually while its revenue was flat

At $35.70 per share, Washington Trust Bancorp trades at 1.2x forward P/B. To fully understand why you should be careful with WASH, check out our full research report (it’s free).

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