A highly volatile stock can deliver big gains - or just as easily wipe out a portfolio if things go south. While some investors embrace risk, mistakes can be costly for those who aren’t prepared.
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 steer clear of and a few better alternatives.
OneWater (ONEW)
Rolling One-Year Beta: 1.45
A public company since early 2020, OneWater Marine (NASDAQ: ONEW) sells boats, yachts, and other marine products.
Why Do We Think Twice About ONEW?
- Lagging same-store sales over the past two years suggest it might have to change its pricing and marketing strategy to stimulate demand
- Gross margin of 24.2% is an output of its commoditized inventory
- High net-debt-to-EBITDA ratio of 8× could force the company to raise capital at unfavorable terms if market conditions deteriorate
OneWater’s stock price of $15.43 implies a valuation ratio of 10.9x forward P/E. Read our free research report to see why you should think twice about including ONEW in your portfolio.
Standex (SXI)
Rolling One-Year Beta: 1.29
Holding over 500 patents globally, Standex (NYSE: SXI) is a manufacturer and distributor of industrial components for various sectors.
Why Does SXI Fall Short?
- Annual revenue growth of 3.3% over the last two years was below our standards for the industrials sector
- Earnings per share lagged its peers over the last two years as they only grew by 7.8% annually
- Free cash flow margin dropped by 4.2 percentage points over the last five years, implying the company became more capital intensive as competition picked up
Standex is trading at $216.11 per share, or 25.2x forward P/E. Check out our free in-depth research report to learn more about why SXI doesn’t pass our bar.
Universal Logistics (ULH)
Rolling One-Year Beta: 1.66
Founded in 1932, Universal Logistics (NASDAQ: ULH) is a provider of customized transportation and logistics solutions operating throughout the United States and in Mexico, Canada, and Colombia.
Why Do We Steer Clear of ULH?
- Annual sales declines of 4.1% for the past two years show its products and services struggled to connect with the market during this cycle
- Earnings per share have contracted by 28% annually over the last two years, a headwind for returns as stock prices often echo long-term EPS performance
- Low free cash flow margin of -0.6% for the last five years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
At $21.70 per share, Universal Logistics trades at 8.3x forward P/E. Dive into our free research report to see why there are better opportunities than ULH.
Stocks We Like More
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