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 that don’t make the cut and some better opportunities instead.
Avery Dennison (AVY)
Rolling One-Year Beta: 0.48
Founded as Kum Kleen Products, Avery Dennison (NYSE: AVY) is a manufacturer of adhesive materials, display graphics, and packaging products, serving various industries.
Why Is AVY Not Exciting?
- Organic revenue growth fell short of our benchmarks over the past two years and implies it may need to improve its products, pricing, or go-to-market strategy
- 3.4 percentage point decline in its free cash flow margin over the last five years reflects the company’s increased investments to defend its market position
- Waning returns on capital imply its previous profit engines are losing steam
At $178.50 per share, Avery Dennison trades at 17.4x forward P/E. To fully understand why you should be careful with AVY, check out our full research report (it’s free).
Employers Holdings (EIG)
Rolling One-Year Beta: 0.56
With roots in Nevada and a strong concentration in California where 45% of its premiums are generated, Employers Holdings (NYSE: EIG) is a specialty provider of workers' compensation insurance focused on small and select businesses engaged in low-to-medium hazard industries across the United States.
Why Should You Sell EIG?
- Net premiums earned expanded by 3.4% annually over the last two years, falling below our expectations for the insurance sector
- Forecasted revenue decline of 1.8% for the upcoming 12 months implies demand will fall off a cliff
- Performance over the past two years shows its incremental sales were much less profitable, as its earnings per share fell by 3.8% annually
Employers Holdings is trading at $43.69 per share, or 0.9x forward P/B. Read our free research report to see why you should think twice about including EIG in your portfolio.
Walker & Dunlop (WD)
Rolling One-Year Beta: 0.84
Originating as a small mortgage banking firm during the Great Depression in 1937, Walker & Dunlop (NYSE: WD) provides commercial real estate financing, property sales, appraisal, and investment management services with a focus on multifamily properties.
Why Are We Wary of WD?
- Customers borrowered less money this cycle as its net interest income declined by 56.7% annually over the last five years
- Performance over the past five years shows its incremental sales were much less profitable, as its earnings per share fell by 6% annually
- Annual tangible book value per share declines of 4.5% for the past five years show its capital management struggled during this cycle
Walker & Dunlop’s stock price of $86.82 implies a valuation ratio of 1.6x forward P/B. Check out our free in-depth research report to learn more about why WD doesn’t pass our bar.
High-Quality Stocks for All Market Conditions
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