Expensive stocks typically earn their valuations through superior growth rates that other companies simply can’t match. The flip side though is that these lofty expectations make them particularly susceptible to drawdowns when market sentiment shifts.
Determining whether a company’s quality justifies its price causes headaches for nearly all investors, which is why we started StockStory - to help you separate the real opportunities from the speculative ones. That said, here is one high-flying stock with strong fundamentals and two where the price is not right.
Two High-Flying Stocks to Sell:
Amazon (AMZN)
Forward EV/EBITDA Ratio: 14.5x
Founded by Jeff Bezos after quitting his stock-picking job at D.E. Shaw, Amazon (NASDAQ: AMZN) is the world’s largest online retailer and provider of cloud computing services.
Why Does AMZN Worry Us?
- Amazon revolutionized the way consumers shop. But its capital-intensive online retail business caps its profitability, leading to margins that lag behind its Magnificent 7 peers.
- Although Amazon Web Services is a gold mine producing mission-critical infrastructure, its outsized scale limits its growth rate compared to smaller peers such as Microsoft Azure and Google Cloud Platform.
- Returns on invested capital are well below their pre-COVID peak as the company is in the middle of an investment cycle. Will Amazon ever harvest profits or keep pushing them to the future?
Amazon’s stock price of $229.98 implies a valuation ratio of 35.8x forward price-to-earnings. Check out our free in-depth research report to learn more about why AMZN doesn’t pass our bar.
Red Rock Resorts (RRR)
Forward P/E Ratio: 33.3x
Founded in 1976, Red Rock Resorts (NASDAQ: RRR) operates a range of casino resorts and entertainment properties, primarily in the Las Vegas metropolitan area.
Why Do We Steer Clear of RRR?
- Sales trends were unexciting over the last five years as its 1.7% annual growth was below the typical consumer discretionary company
- Demand will likely fall over the next 12 months as Wall Street expects flat revenue
- Eroding returns on capital suggest its historical profit centers are aging
At $54.66 per share, Red Rock Resorts trades at 33.3x forward P/E. Read our free research report to see why you should think twice about including RRR in your portfolio.
One High-Flying Stock to Watch:
Veeva Systems (VEEV)
Forward P/S Ratio: 15x
Built on top of Salesforce as one of the first vertical-focused cloud platforms, Veeva (NYSE: VEEV) provides data and customer relationship management (CRM) software for organizations in the life sciences industry.
Why Is VEEV on Our Radar?
- Average billings growth of 15.5% over the last year enhances its liquidity and shows there is steady demand for its products
- Disciplined cost controls and effective management resulted in a strong trailing 12-month operating margin of 27%, and its profits increased over the last year as it scaled
- Impressive free cash flow profitability enables the company to fund new investments or reward investors with share buybacks/dividends
Veeva Systems is trading at $287.72 per share, or 15x forward price-to-sales. Is now a good time to buy? See for yourself in our in-depth research report, it’s free.
Stocks We Like Even More
When Trump unveiled his aggressive tariff plan in April 2024, markets tanked as investors feared a full-blown trade war. But those who panicked and sold missed the subsequent rebound that’s already erased most losses.
Don’t let fear keep you from great opportunities and take a look at 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 Kadant (+351% 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
StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.
