Every day, Wall Street analysts upgrade some stocks, downgrade others, and "initiate coverage" on a few more. But do these analysts even know what they're talking about? Today, we're taking one high-profile Wall Street pick and putting it under the microscope...

Nielsen Holdings' (NYSE:NLSN) stock looks like a reverse image of the rest of the stock market. Over the past 52 weeks, Nielsen Holdings shares are down 18%, while the S&P 500 is up 18%. But according to one analyst, Nielsen stock -- which currently costs less than $36 a share -- is about to blaze a trail to $45 and beyond, providing investors with a 26% profit in the process.

Here are three things you need to know.

Family watching TV and laughing

Image source: Getty Images.

1. What's wrong with Nielsen today

Nielsen stock has been pummeled this past year, but most of the damage was caused last month, when Nielsen released its fiscal Q3 earnings report. Despite reporting a 4% gain in sales year over year, and a 12% improvement in profits, investors rejected the stock, selling off Nielsen to the tune of 6% after earnings, and a further 7% in the weeks since.

2. And how to fix it

Attempting to salvage the situation, Nielsen earlier this month laid out a "Path to 2020" plan to cut costs and boost profits. At its investor day last week, the company explained how it intends to grow its sales 4% annually on average over the next five years. Cutting $500 million in annual costs, it hopes to deliver "significant margin expansion," and transform this 4% sales growth rate into double-digit annual GAAP earnings growth through 2020.

Improvements may not come quickly, however. In last month's earnings report, Nielsen promised investors it will deliver 4% sales growth this year, between $1.40 and $1.46 in net income per share, and free cash flow of $900 million. At the investor day this month, however, Nielsen clarified that in 2018, its sales growth will actually slow to 3%, profits will grow not at all, and free cash flow will decline to $800 million.

That's a pretty slow start toward Nielsen's stated goal of "double-digit GAAP earnings per share CAGR through 2020."

3. How analysts are reacting

Nielsen's "Path to 2020" project nonetheless elicited praise on Wall Street. Ace investor Macquarie, for example, maintained its outperform rating on the stock (but cutting its price target to $44 a share). This morning, Citigroup is even more optimistic.

As reported today on TheFly.com, Citi is looking past the expected declines of 2018 to predict "better results and 2019 and 2020" as Nielsen resumes "normal" sales growth and cuts costs to boost earnings. Raising its price target to $45 per share, Citi is upgrading Nielsen stock to buy.

But is that the right call?

Nielsen by the numbers

I'm not so sure it is. Sure, at first glance, Nielsen stock looks attractive. Data from S&P Global Market Intelligence show Nielsen generating roughly $1.27 billion in positive free cash flow over the last 12 months. Weighed against the company's $12.7 billion market capitalization, that works out to a picture-perfect price-to-free-cash-flow ratio of 10 -- but there's a problem with this picture.

S&P Global data shows Nielsen currently carrying about $7.8 billion in net debt on its balance sheet. Added to the company's market capitalization, this gives Nielsen an enterprise value of $20.5 billion -- and thus an enterprise value-to-free-cash-flow ratio of 16.1. Granted, if Nielsen can come up with the double-digit growth that it's promising over the next three years, even this higher valuation might look reasonable. But look at what Nielsen has been doing so far, before taking Nielsen's "Path to 2020" at face value:

Nielsen Holdings comprises two main business divisions: the well-known "Watch" division, which tracks television viewership, for example; and a slightly larger "Buy" division that sells consumer behavioral data, primarily to companies in the consumer package goods industry.

Over the past five years, Nielsen has grown sales at its watch business 50%, while nearly doubling the division's operating profit. Unfortunately, the buy division hasn't been so lucky. Sales last year were actually slightly below where they stood five years ago, in 2011. Meanwhile, buy's profits have declined 22% over five years.

Simply put, while the watch division (that Nielsen is best known for) is thriving, buy is dying. Nielsen really needs to relieve itself of this lodestone -- which remember, makes up more than half the business -- if it hopes to jump-start earnings growth and make itself worthy of investment. Unless and until Nielsen gets rid of "Buy," Nielsen stock won't be a buy, either.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.