"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. That said, here is one high-flying stock to hold for the long term and two with big downside risk.
Two High-Flying Stocks to Sell:
Lucky Strike (LUCK)
Forward P/E Ratio: 66.5x
Born from the transformation of traditional bowling alleys into modern entertainment destinations, Lucky Strike (NYSE: LUCK) operates bowling alleys and other entertainment venues with upscale amenities, arcade games, and food and beverage services across North America.
Why Do We Avoid LUCK?
- Disappointing same-store sales over the past two years show customers aren’t responding well to its product selection and in-store experience
- Waning returns on capital imply its previous profit engines are losing steam
- High net-debt-to-EBITDA ratio of 7× increases the risk of forced asset sales or dilutive financing if operational performance weakens
Lucky Strike is trading at $9.99 per share, or 66.5x forward P/E. Dive into our free research report to see why there are better opportunities than LUCK.
Penumbra (PEN)
Forward P/E Ratio: 61.1x
Founded in 2004 to address challenging medical conditions with significant unmet needs, Penumbra (NYSE: PEN) develops and manufactures innovative medical devices for treating vascular diseases and providing immersive healthcare rehabilitation solutions.
Why Are We Wary of PEN?
- Subscale operations are evident in its revenue base of $1.28 billion, meaning it has fewer distribution channels than its larger rivals
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 4% for the last five years
- Underwhelming 0.3% return on capital reflects management’s difficulties in finding profitable growth opportunities
At $261.75 per share, Penumbra trades at 61.1x forward P/E. Read our free research report to see why you should think twice about including PEN in your portfolio.
One High-Flying Stock to Buy:
O'Reilly (ORLY)
Forward P/E Ratio: 34.1x
Serving both the DIY customer and professional mechanic, O’Reilly Automotive (NASDAQ: ORLY) is an auto parts and accessories retailer that sells everything from fuel pumps to car air fresheners to mufflers.
Why Should You Buy ORLY?
- Brick-and-mortar locations are witnessing elevated demand as their same-store sales growth averaged 3.9% over the past two years
- Differentiated product assortment leads to a best-in-class gross margin of 51.3%
- Robust free cash flow margin of 11.1% gives it many options for capital deployment
O'Reilly’s stock price of $106.47 implies a valuation ratio of 34.1x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
Trump’s April 2025 tariff bombshell triggered a massive market selloff, but stocks have since staged an impressive recovery, leaving those who panic sold on the sidelines.
Take advantage of the rebound by checking out our Top 6 Stocks for this week. 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. Find your next big winner with StockStory today. Find your next big winner with StockStory today
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