"You get what you pay for" often applies to expensive stocks with best-in-class business models and execution. While their quality can sometimes justify the premium, they typically experience elevated volatility during market downturns when expectations change.
Finding the right balance between price and quality can challenge even the most skilled investors. Luckily for you, we started StockStory to help you identify the real opportunities. That said, here is one high-flying stock expanding its competitive advantage and two with big downside risk.
Two High-Flying Stocks to Sell:
FormFactor (FORM)
Forward P/E Ratio: 37.4x
With customers across the foundry and fabless markets, FormFactor (NASDAQ: FORM) is a US-based provider of test and measurement technologies for semiconductors.
Why Should You Dump FORM?
- 3.7% annual revenue growth over the last five years was slower than its semiconductor peers
- Free cash flow margin dropped by 13.3 percentage points over the last five years, implying the company became more capital intensive as competition picked up
- Low returns on capital reflect management’s struggle to allocate funds effectively, and its decreasing returns suggest its historical profit centers are aging
At $42.78 per share, FormFactor trades at 37.4x forward P/E. Dive into our free research report to see why there are better opportunities than FORM.
nLIGHT (LASR)
Forward P/E Ratio: 3,256x
Founded by a former CEO and Harvard-educated entrepreneur Scott Keeneyn, nLIGHT (NASDAQ: LASR) offers semiconductor and fiber lasers to the industrial, aerospace & defense, and medical sectors.
Why Do We Think LASR Will Underperform?
- Sales tumbled by 1.6% annually over the last two years, showing market trends are working against its favor during this cycle
- Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 6.4 percentage points
- Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
nLIGHT’s stock price of $32.61 implies a valuation ratio of 3,256x forward P/E. If you’re considering LASR for your portfolio, see our FREE research report to learn more.
One High-Flying Stock to Buy:
CrowdStrike (CRWD)
Forward P/S Ratio: 23.2x
Known for detecting the massive SolarWinds hack in 2020 that compromised numerous government agencies, CrowdStrike (NASDAQ: CRWD) provides cloud-based cybersecurity solutions that protect endpoints, cloud workloads, identity, and data through its Falcon platform.
Why Are We Backing CRWD?
- Billings have averaged 25% growth over the last year, showing it’s securing new contracts that could potentially increase in value over time
- Sales outlook for the upcoming 12 months implies the business will stay on its desirable two-year growth trajectory
- User-friendly software enables clients to ramp up spending quickly, leading to the speedy recovery of customer acquisition costs
CrowdStrike is trading at $488.95 per share, or 23.2x forward price-to-sales. Is now the right time to buy? Find out in our full research report, it’s free for active Edge members.
Stocks We Like Even More
Trump’s April 2025 tariff bombshell triggered a massive market selloff, but stocks have since staged an impressive recovery, leaving those who panic sold on the sidelines.
Take advantage of the rebound by checking out our Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today
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