Volatility cuts both ways - while it creates opportunities, it also increases risk, making sharp declines just as likely as big gains. This unpredictability can shake out even the most experienced investors.
Navigating these stocks isn’t easy, which is why StockStory helps you find Comfort In Chaos. That said, here are three volatile stocks best left to the gamblers and some better opportunities instead.
SoundHound AI (SOUN)
Rolling One-Year Beta: 2.92
Founded in 2005, SoundHound AI (NASDAQ: SOUN) develops independent voice artificial intelligence solutions that enable businesses across various industries to offer customized conversational experiences to consumers.
Why Do We Think Twice About SOUN?
- Sky-high servicing costs result in an inferior gross margin of 40.5% that must be offset through increased usage
- Operating margin declined by 43.6 percentage points over the last year as it scaled
- Cash-burning history makes us doubt the long-term viability of its business model
SoundHound AI’s stock price of $16.21 implies a valuation ratio of 34x forward price-to-sales. Check out our free in-depth research report to learn more about why SOUN doesn’t pass our bar.
Triumph Financial (TFIN)
Rolling One-Year Beta: 1.31
Originally focused on traditional banking before pivoting to serve the transportation sector, Triumph Financial (NASDAQ: TFIN) provides specialized financial services to the trucking industry, including payments processing, factoring, banking, and data intelligence solutions.
Why Are We Hesitant About TFIN?
- Muted 6.4% annual net interest income growth over the last five years shows its demand lagged behind its banking peers
- Net interest margin dropped by 121 basis points (100 basis points = 1 percentage point) over the last two years, implying the firm’s loan book profitability fell as competitors entered the market
- Performance over the past five years shows its incremental sales were much less profitable, as its earnings per share fell by 19.4% annually
At $52.56 per share, Triumph Financial trades at 1.4x forward P/B. If you’re considering TFIN for your portfolio, see our FREE research report to learn more.
Banc of California (BANC)
Rolling One-Year Beta: 1.06
Originally established in 1941 and now operating with a tech-forward approach that includes its SmartStreet platform for homeowner associations, Banc of California (NYSE: BANC) is a California-based bank holding company that provides banking services to small and middle-market businesses, entrepreneurs, and individuals.
Why Are We Cautious About BANC?
- Net interest income tumbled by 1.3% annually over the last five years, showing market trends are working against its favor during this cycle
- Annual tangible book value per share declines of 3.9% for the past five years show its capital management struggled during this cycle
- Negative return on equity shows management lost money while trying to expand the business
Banc of California is trading at $14.82 per share, or 0.7x forward P/B. Dive into our free research report to see why there are better opportunities than BANC.
Stocks We Like More
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