Expensive stocks often command premium valuations because the market thinks their business models are exceptional. However, the downside is that high expectations are already baked into their prices, leaving little room for error if they stumble even slightly.
Separating true intrinsic value from speculation isn’t easy, especially during bull markets. That’s where StockStory comes in - to help you find high-quality companies that will stand the test of time. That said, here is one high-flying stock with strong fundamentals and two with big downside risk.
Two High-Flying Stocks to Sell:
Sleep Number (SNBR)
Forward P/E Ratio: 43.1x
Known for mattresses that can be adjusted with regards to firmness, Sleep Number (NASDAQ: SNBR) manufactures and sells its own brand of bedding products such as mattresses, bed frames, and pillows.
Why Do We Steer Clear of SNBR?
- Weak same-store sales trends over the past two years suggest there may be few opportunities in its core markets to open new locations
- Forecasted revenue decline of 5.7% for the upcoming 12 months implies demand will fall off a cliff
- Limited cash reserves may force the company to seek unfavorable financing terms that could dilute shareholders
Sleep Number’s stock price of $6.67 implies a valuation ratio of 43.1x forward P/E. Read our free research report to see why you should think twice about including SNBR in your portfolio.
Kadant (KAI)
Forward P/E Ratio: 31.4x
Headquartered in Massachusetts, Kadant (NYSE: KAI) is a global supplier of high-value, critical components and engineered systems used in process industries worldwide.
Why Is KAI Not Exciting?
- Annual revenue growth of 4.9% over the last two years was below our standards for the industrials sector
- Flat earnings per share over the last two years lagged its peers
- Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 2.7 percentage points
Kadant is trading at $297 per share, or 31.4x forward P/E. Dive into our free research report to see why there are better opportunities than KAI.
One High-Flying Stock to Watch:
Medpace (MEDP)
Forward P/E Ratio: 35.4x
Founded in 1992 as a scientifically-driven alternative to traditional contract research organizations, Medpace (NASDAQ: MEDP) provides outsourced clinical trial management and research services to help pharmaceutical, biotechnology, and medical device companies develop new treatments.
Why Do We Watch MEDP?
- Core business is healthy and doesn’t need acquisitions to boost sales as its organic revenue growth averaged 15.7% over the past two years
- Performance over the past five years was turbocharged by share buybacks, which enabled its earnings per share to grow faster than its revenue
- Industry-leading 44.1% return on capital demonstrates management’s skill in finding high-return investments
At $511.53 per share, Medpace trades at 35.4x forward P/E. Is now a good time to buy? See for yourself in our comprehensive 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 6 Stocks for this week. 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-micro-cap company Tecnoglass (+1,754% 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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