A stock with low volatility can be reassuring, but it doesn’t always mean strong long-term performance. Investors who prioritize stability may miss out on higher-reward opportunities elsewhere.
Luckily for you, StockStory helps you navigate which companies are truly worth holding. That said, here are three low-volatility stocks to avoid and some better opportunities instead.
Lowe's (LOW)
Rolling One-Year Beta: 0.74
Founded in North Carolina as Lowe's North Wilkesboro Hardware, the company is a home improvement retailer that sells everything from paint to tools to building materials.
Why Does LOW Worry Us?
- Scale is a double-edged sword because it limits the company’s growth potential compared to its smaller competitors, as reflected in its below-average annual revenue increases of 2.6% for the last six years
- Store closures and disappointing same-store sales suggest demand is sluggish and it’s rightsizing its operations
- Disappointing same-store sales over the past two years show customers aren’t responding well to its product selection and store experience
Lowe’s stock price of $243.25 implies a valuation ratio of 18.9x forward P/E. Check out our free in-depth research report to learn more about why LOW doesn’t pass our bar.
Flowers Foods (FLO)
Rolling One-Year Beta: 0.17
With Wonder Bread as its premier brand, Flower Foods (NYSE: FLO) is a packaged foods company that focuses on bakery products such as breads, buns, and cakes.
Why Are We Hesitant About FLO?
- Falling unit sales over the past two years suggest it might have to lower prices to stimulate growth
- Demand will likely be soft over the next 12 months as Wall Street’s estimates imply tepid growth of 3.9%
- Falling earnings per share over the last three years has some investors worried as stock prices ultimately follow EPS over the long term
Flowers Foods is trading at $12.55 per share, or 12x forward P/E. Dive into our free research report to see why there are better opportunities than FLO.
AdaptHealth (AHCO)
Rolling One-Year Beta: 0.36
With a network of approximately 680 locations serving patients across all 50 states, AdaptHealth (NASDAQ: AHCO) provides home medical equipment, supplies, and related services to patients with chronic conditions like sleep apnea, diabetes, and respiratory disorders.
Why Are We Wary of AHCO?
- Sales trends were unexciting over the last two years as its 2.7% annual growth was below the typical healthcare company
- Incremental sales over the last five years were much less profitable as its earnings per share fell by 1.1% annually while its revenue grew
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
At $9.60 per share, AdaptHealth trades at 9.4x forward P/E. If you’re considering AHCO for your portfolio, see our FREE research report to learn more.
Stocks We Like More
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