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. Keeping that in mind, here are three volatile stocks to avoid and some better opportunities instead.
Lovesac (LOVE)
Rolling One-Year Beta: 2.06
Known for its oversized, premium beanbags, Lovesac (NASDAQ: LOVE) is a specialty furniture brand selling modular furniture.
Why Is LOVE Not Exciting?
- Sales trends were unexciting over the last two years as its 1.7% annual growth was below the typical consumer discretionary company
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 1% for the last two years
- Diminishing returns on capital suggest its earlier profit pools are drying up
At $18.26 per share, Lovesac trades at 5.3x forward EV-to-EBITDA. If you’re considering LOVE for your portfolio, see our FREE research report to learn more.
Covenant Logistics (CVLG)
Rolling One-Year Beta: 1.37
Started with 25 trucks and 50 trailers, Covenant Logistics (NASDAQ: CVLG) is a provider of expedited long haul freight services, offering a range of logistics solutions.
Why Is CVLG Risky?
- Sales were flat over the last two years, indicating it’s failed to expand this cycle
- 20.4 percentage point decline in its free cash flow margin over the last five years reflects the company’s increased investments to defend its market position
- Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability
Covenant Logistics is trading at $23.56 per share, or 11.5x forward EV-to-EBITDA. Read our free research report to see why you should think twice about including CVLG in your portfolio.
Comerica (CMA)
Rolling One-Year Beta: 1.22
Founded in 1849 during the California Gold Rush era, Comerica (NYSE: CMA) is a financial services company that provides commercial banking, retail banking, and wealth management services to businesses and individuals.
Why Are We Hesitant About CMA?
- Net interest income trends were unexciting over the last five years as its 3.2% annual growth was below the typical banking firm
- Sales were less profitable over the last two years as its earnings per share fell by 26.9% annually, worse than its revenue declines
- Tangible book value per share was flat over the last five years, indicating it’s failed to build equity value this cycle
Comerica’s stock price of $67.55 implies a valuation ratio of 1.3x forward P/B. Dive into our free research report to see why there are better opportunities than CMA.
High-Quality Stocks for All Market Conditions
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