Market swings can be tough to stomach, and volatile stocks often experience exaggerated moves in both directions. While many thrive during risk-on environments, many also struggle to maintain investor confidence when the ride gets bumpy.
These stocks can be a rollercoaster, and StockStory is here to guide you through the ups and downs. That said, here are three volatile stocks to steer clear of and a few better alternatives.
Fluence Energy (FLNC)
Rolling One-Year Beta: 1.67
Pioneering the use of lithium-ion batteries for grid storage, Fluence (NASDAQ: FLNC) helps store renewable energy sources with battery systems.
Why Does FLNC Give Us Pause?
- Competitive supply chain dynamics and steep production costs are reflected in its low gross margin of 7.2%
- Free cash flow margin dropped by 6.4 percentage points over the last five years, implying the company increased its investment activities to fend off competitors
- Unfavorable liquidity position could lead to additional equity financing that dilutes shareholders
Fluence Energy’s stock price of $7.28 implies a valuation ratio of 100.4x forward P/E. Read our free research report to see why you should think twice about including FLNC in your portfolio.
ChargePoint (CHPT)
Rolling One-Year Beta: 1.47
The most prominent EV charging company during the COVID bull market, ChargePoint (NYSE: CHPT) is a provider of electric vehicle charging technology solutions in North America and Europe.
Why Are We Hesitant About CHPT?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 11.2% annually over the last two years
- Negative free cash flow raises questions about the return timeline for its investments
- Limited cash reserves may force the company to seek unfavorable financing terms that could dilute shareholders
ChargePoint is trading at $11.46 per share, or 12.2x forward price-to-sales. If you’re considering CHPT for your portfolio, see our FREE research report to learn more.
Methode Electronics (MEI)
Rolling One-Year Beta: 2.09
Founded in 1946, Methode Electronics (NYSE: MEI) is a global supplier of custom-engineered solutions for Original Equipment Manufacturers (OEMs).
Why Do We Steer Clear of MEI?
- Annual sales declines of 5.7% for the past two years show its products and services struggled to connect with the market during this cycle
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
- Depletion of cash reserves could lead to a fundraising event that triggers shareholder dilution
At $7.76 per share, Methode Electronics trades at 11.6x forward P/E. Check out our free in-depth research report to learn more about why MEI doesn’t pass our bar.
High-Quality Stocks for All Market Conditions
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