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.
At StockStory, our job is to help you avoid costly mistakes and stay on the right side of the trade. That said, here are three volatile stocks to avoid and some better opportunities instead.
Caesars Entertainment (CZR)
Rolling One-Year Beta: 1.58
Formerly Eldorado Resorts, Caesars Entertainment (NASDAQ: CZR) is a global gaming and hospitality company operating numerous casinos, hotels, and resort properties.
Why Does CZR Fall Short?
- Sales were flat over the last two years, indicating it’s failed to expand its business
- Performance over the past five years shows its incremental sales were much less profitable, as its earnings per share fell by 10% annually
- High net-debt-to-EBITDA ratio of 6× increases the risk of forced asset sales or dilutive financing if operational performance weakens
Caesars Entertainment’s stock price of $27.00 implies a valuation ratio of 32.9x forward P/E. To fully understand why you should be careful with CZR, check out our full research report (it’s free).
Helios (HLIO)
Rolling One-Year Beta: 1.46
Founded on the principle of treating others as one wants to be treated, Helios (NYSE: HLIO) designs, manufactures, and sells motion and electronic control components for various sectors.
Why Should You Dump HLIO?
- Organic revenue growth fell short of our benchmarks over the past two years and implies it may need to improve its products, pricing, or go-to-market strategy
- Earnings per share fell by 2.9% annually over the last five years while its revenue grew, showing its incremental sales were much less profitable
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
Helios is trading at $55.04 per share, or 25.3x forward EV-to-EBITDA. Check out our free in-depth research report to learn more about why HLIO doesn’t pass our bar.
Ally Financial (ALLY)
Rolling One-Year Beta: 1.09
Born from the former GMAC (General Motors Acceptance Corporation) and rebranded in 2010, Ally Financial (NYSE: ALLY) operates a digital-first bank offering auto financing, insurance, mortgage lending, and investment services to consumers and commercial clients.
Why Is ALLY Risky?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 3.8% annually over the last two years
- Sales were less profitable over the last two years as its earnings per share fell by 8.9% annually, worse than its revenue declines
- Muted 1.7% annual tangible book value per share growth over the last five years shows its capital generation lagged behind its financials peers
At $41.13 per share, Ally Financial trades at 9x forward P/E. If you’re considering ALLY for your portfolio, see our FREE research report to learn more.
High-Quality Stocks for All Market Conditions
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