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 to avoid and some better opportunities instead.
J. M. Smucker (SJM)
Rolling One-Year Beta: 0.14
Best known for its fruit jams and spreads, J.M Smucker (NYSE: SJM) is a packaged foods company whose products span from peanut butter and coffee to pet food.
Why Should You Dump SJM?
- Organic sales performance over the past two years indicates the company may need to make strategic adjustments or rely on M&A to catalyze faster growth
- Expenses have increased as a percentage of revenue over the last year as its operating margin fell by 23.7 percentage points
- Low returns on capital reflect management’s struggle to allocate funds effectively, and its shrinking returns suggest its past profit sources are losing steam
J. M. Smucker’s stock price of $108 implies a valuation ratio of 10.6x forward P/E. Check out our free in-depth research report to learn more about why SJM doesn’t pass our bar.
Sherwin-Williams (SHW)
Rolling One-Year Beta: 0.74
Widely known for its success in the paint industry, Sherwin-Williams (NYSE: SHW) is a manufacturer of paints, coatings, and related products.
Why Are We Cautious About SHW?
- Absence of organic revenue growth over the past two years suggests it may have to lean into acquisitions to drive its expansion
- Estimated sales growth of 2.5% for the next 12 months is soft and implies weaker demand
- Free cash flow margin shrank by 7.6 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
At $343.41 per share, Sherwin-Williams trades at 27.3x forward P/E. To fully understand why you should be careful with SHW, check out our full research report (it’s free).
Progyny (PGNY)
Rolling One-Year Beta: 0.78
Pioneering a data-driven approach to family building that has achieved an industry-leading patient satisfaction score of +80, Progyny (NASDAQ: PGNY) provides comprehensive fertility and family building benefits solutions to employers, helping employees access quality fertility treatments and support services.
Why Is PGNY Not Exciting?
- Subscale operations are evident in its revenue base of $1.21 billion, meaning it has fewer distribution channels than its larger rivals
- Estimated sales growth of 3.6% for the next 12 months implies demand will slow from its two-year trend
- Push for growth has led to negative returns on capital, signaling value destruction
Progyny is trading at $22.29 per share, or 13.7x forward P/E. Read our free research report to see why you should think twice about including PGNY in your portfolio.
High-Quality Stocks for All Market Conditions
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