Market swings can be tough to stomach, and volatile stocks often experience exaggerated moves in both directions. While many thrive during risk-on environments, many also struggle to maintain investor confidence when the ride gets bumpy.
These stocks can be a rollercoaster, and StockStory is here to guide you through the ups and downs. Keeping that in mind, here are three volatile stocks to avoid and some better opportunities instead.
Flywire (FLYW)
Rolling One-Year Beta: 1.23
Initially created to solve the challenges of international student tuition payments, Flywire (NASDAQ: FLYW) provides specialized payment processing and software solutions that help educational institutions, healthcare systems, travel companies, and businesses manage complex payments.
Why Is FLYW Not Exciting?
- Gross margin of 62.9% reflects its relatively high servicing costs
- Competitive market means the company must spend more on sales and marketing to stand out even if the return on investment is low
- Operating profits increased over the last year as the company gained some leverage on its fixed costs and became more efficient
Flywire’s stock price of $12.81 implies a valuation ratio of 2.5x forward price-to-sales. To fully understand why you should be careful with FLYW, check out our full research report (it’s free for active Edge members).
Lincoln Electric (LECO)
Rolling One-Year Beta: 1.15
Headquartered in Ohio, Lincoln Electric (NASDAQ: LECO) manufactures and sells welding equipment for various industries.
Why Do We Think Twice About LECO?
- Absence of organic revenue growth over the past two years suggests it may have to lean into acquisitions to drive its expansion
- Demand will likely be soft over the next 12 months as Wall Street’s estimates imply tepid growth of 6.4%
- Earnings growth underperformed the sector average over the last two years as its EPS grew by just 5.2% annually
At $235.08 per share, Lincoln Electric trades at 22.8x forward P/E. Dive into our free research report to see why there are better opportunities than LECO.
Cummins (CMI)
Rolling One-Year Beta: 1.30
With more than half of the heavy-duty truck market using its engines at one point, Cummins (NYSE: CMI) offers engines and power systems.
Why Does CMI Give Us Pause?
- Large revenue base makes it harder to increase sales quickly, and its annual revenue growth of 2.3% over the last two years was below our standards for the industrials sector
- Free cash flow margin dropped by 6.9 percentage points over the last five years, implying the company became more capital intensive as competition picked up
- Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability
Cummins is trading at $426.69 per share, or 19.8x forward P/E. If you’re considering CMI for your portfolio, see our FREE research report to learn more.
High-Quality Stocks for All Market Conditions
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