Low-volatility stocks may offer stability, but that often comes at the cost of slower growth and the upside potential of more dynamic companies.
Finding the right balance between safety and returns isn’t easy, which is why StockStory is here to help. Keeping that in mind, here are three low-volatility stocks to avoid and some better opportunities instead.
Alamo (ALG)
Rolling One-Year Beta: 0.69
Expanding its markets through acquisitions since its founding, Alamo (NSYE:ALG) designs, manufactures, and services vegetation management and infrastructure maintenance equipment for governmental, industrial, and agricultural use.
Why Is ALG Risky?
- Flat sales over the last two years suggest it must find different ways to grow during this cycle
- Estimated sales growth of 2.8% for the next 12 months is soft and implies weaker demand
- Earnings per share were flat over the last two years and fell short of the peer group average
Alamo is trading at $200.50 per share, or 19.6x forward P/E. To fully understand why you should be careful with ALG, check out our full research report (it’s free).
BD (BDX)
Rolling One-Year Beta: 0.33
With a history dating back to 1897 and a presence in virtually every hospital around the globe, Becton Dickinson (NYSE: BDX) develops and manufactures medical supplies, devices, laboratory equipment and diagnostic products used by healthcare institutions and professionals worldwide.
Why Are We Hesitant About BDX?
- Annual sales growth of 4.1% over the last five years lagged behind its healthcare peers as its large revenue base made it difficult to generate incremental demand
- Free cash flow margin dropped by 10.5 percentage points over the last five years, implying the company became more capital intensive as competition picked up
- Underwhelming 4.3% return on capital reflects management’s difficulties in finding profitable growth opportunities
BD’s stock price of $170.98 implies a valuation ratio of 11.4x forward P/E. Read our free research report to see why you should think twice about including BDX in your portfolio.
IQVIA (IQV)
Rolling One-Year Beta: 0.66
Created from the 2016 merger of Quintiles (a clinical research organization) and IMS Health (a healthcare data specialist), IQVIA (NYSE: IQV) provides clinical research services, data analytics, and technology solutions to help pharmaceutical companies develop and market medications more effectively.
Why Are We Cautious About IQV?
- Sizable revenue base leads to growth challenges as its 3.4% annual revenue increases over the last two years fell short of other healthcare companies
- Underwhelming constant currency revenue performance over the past two years suggests its product offering at current prices doesn’t resonate with customers
- Free cash flow margin dropped by 3 percentage points over the last five years, implying the company became more capital intensive as competition picked up
At $144.46 per share, IQVIA trades at 11.6x forward P/E. Dive into our free research report to see why there are better opportunities than IQV.
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