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?

1. Competitive supply chain dynamics and steep production costs are reflected in its low gross margin of 7.2%
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
3. 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?

1. 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
2. Negative free cash flow raises questions about the return timeline for its investments
3. 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?

1. 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
2. Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
3. 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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