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. Keeping that in mind, here are two high-flying stocks expanding their competitive advantages and one climbing an uphill battle.
One High-Flying Stock to Sell:
Walmart (WMT)
Forward P/E Ratio: 30.5x
Known for its large-format Supercenters, Walmart (NYSE: WMT) is a retail pioneer that serves a budget-conscious consumer who is looking for a wide range of products under one roof.
Why Does WMT Worry Us?
- Annual sales growth of 5.4% over the last five years lagged behind its consumer retail peers as its large revenue base made it difficult to generate incremental demand
- Commoditized inventory, bad unit economics, and high competition are reflected in its low gross margin of 24.6%
- Operating margin of 4.2% falls short of the industry average, and the smaller profit dollars make it harder to react to unexpected market developments
Walmart is trading at $86.66 per share, or 30.5x forward price-to-earnings. To fully understand why you should be careful with WMT, check out our full research report (it’s free).
Two High-Flying Stocks to Buy:
Wingstop (WING)
Forward P/E Ratio: 52x
The passion project of two chicken wing aficionados in Texas, Wingstop (NASDAQ: WING) is a popular fast-food chain known for its flavorful and crispy chicken wings offered in a variety of sauces and seasonings.
Why Are We Backing WING?
- Customers are lining up to eat at its restaurants as the company’s same-store sales growth averaged 19.3% over the past two years
- Healthy operating margin of 25.6% shows it’s a well-run company with efficient processes, and its rise over the last year was fueled by some leverage on its fixed costs
- Robust free cash flow margin of 17.2% gives it many options for capital deployment
Wingstop’s stock price of $231.30 implies a valuation ratio of 52x forward price-to-earnings. Is now a good time to buy? Find out in our full research report, it’s free.
American Superconductor (AMSC)
Forward P/E Ratio: 40.2x
Founded in 1987, American Superconductor (NASDAQ: AMSC) has shifted from superconductor research to developing power systems, adapting to changing energy grid needs and naval technology requirements.
Why Do We Love AMSC?
- Annual revenue growth of 39% over the last two years was superb and indicates its market share increased during this cycle
- Free cash flow turned positive over the last five years, indicating the company has passed a significant test
- Historical investments are beginning to pay off as its returns on capital are growing
At $17.48 per share, American Superconductor trades at 40.2x forward price-to-earnings. Is now the time to initiate a position? See for yourself in our in-depth research report, it’s free.
Stocks We Like Even More
Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.
While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.
Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like United Rentals (+322% five-year return). Find your next big winner with StockStory today for free.
