"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.
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. Keeping that in mind, here are three high-flying stocks with big downside risk and some other investments you should consider instead.
Palo Alto Networks (PANW)
Forward P/S Ratio: 13.9x
Founded in 2005 by cybersecurity engineer Nir Zuk, Palo Alto Networks (NASDAQ: PANW) makes hardware and software cybersecurity products that protect companies from cyberattacks, breaches, and malware threats.
Why Does PANW Fall Short?
- 19.7% annual revenue growth over the last three years was slower than its software peers
- Offerings struggled to generate meaningful interest as its average billings growth of 3% over the last year did not impress
Palo Alto Networks is trading at $199.70 per share, or 13.9x forward price-to-sales. Dive into our free research report to see why there are better opportunities than PANW.
Transcat (TRNS)
Forward P/E Ratio: 35.2x
Serving the pharmaceutical, industrial manufacturing, energy, and chemical process industries, Transcat (NASDAQ: TRNS) provides measurement instruments and supplies.
Why Does TRNS Give Us Pause?
- Operating margin of 7.1% falls short of the industry average, and the smaller profit dollars make it harder to react to unexpected market developments
- Low returns on capital reflect management’s struggle to allocate funds effectively, and its decreasing returns suggest its historical profit centers are aging
Transcat’s stock price of $80.54 implies a valuation ratio of 35.2x forward P/E. Read our free research report to see why you should think twice about including TRNS in your portfolio.
Myriad Genetics (MYGN)
Forward P/E Ratio: 38.4x
Founded in 1991 as one of the pioneers in translating genetic discoveries into clinical applications, Myriad Genetics (NASDAQ: MYGN) develops genetic tests that assess disease risk, guide treatment decisions, and provide insights across oncology, women's health, and mental health.
Why Should You Dump MYGN?
- 1.8% annual revenue growth over the last five years was slower than its healthcare peers
- Earnings per share fell by 28.9% annually over the last five years while its revenue grew, showing its incremental sales were much less profitable
- Push for growth has led to negative returns on capital, signaling value destruction, and its shrinking returns suggest its past profit sources are losing steam
At $4.92 per share, Myriad Genetics trades at 38.4x forward P/E. To fully understand why you should be careful with MYGN, check out our full research report (it’s free).
High-Quality Stocks for All Market Conditions
The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.
While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio 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.
