Expensive stocks typically earn their valuations through superior growth rates that other companies simply can’t match. The flip side though is that these lofty expectations make them particularly susceptible to drawdowns when market sentiment shifts.
Determining whether a company’s quality justifies its price causes headaches for nearly all investors, which is why we started StockStory - to help you separate the real opportunities from the speculative ones. That said, here are three high-flying stocks with big downside risk and some other investments you should consider instead.
Proto Labs (PRLB)
Forward P/E Ratio: 31.5x
Pioneering the concept of online quoting and manufacturing for custom prototypes and low-volume production parts, Proto Labs (NYSE: PRLB) offers injection molding, 3D printing, and sheet metal fabrication for manufacturers in various industries.
Why Do We Think PRLB Will Underperform?
- Sales trends were unexciting over the last two years as its 2.4% annual growth was below the typical industrials company
- Expenses have increased as a percentage of revenue over the last five years as its operating margin fell by 7.6 percentage points
- Earnings per share have dipped by 9.3% annually over the past five years, which is concerning because stock prices follow EPS over the long term
Proto Labs’s stock price of $48.23 implies a valuation ratio of 31.5x forward P/E. Check out our free in-depth research report to learn more about why PRLB doesn’t pass our bar.
Corcept (CORT)
Forward P/E Ratio: 75.1x
Focusing on the powerful stress hormone that affects everything from metabolism to immune function, Corcept Therapeutics (NASDAQ: CORT) develops and markets medications that modulate cortisol to treat endocrine disorders, cancer, and neurological diseases.
Why Are We Hesitant About CORT?
- Efficiency has decreased over the last five years as its adjusted operating margin fell by 16.9 percentage points
- Earnings per share fell by 2.8% annually over the last five years while its revenue grew, showing its incremental sales were much less profitable
- Eroding returns on capital suggest its historical profit centers are aging
Corcept is trading at $76 per share, or 75.1x forward P/E. Dive into our free research report to see why there are better opportunities than CORT.
Verisk (VRSK)
Forward P/E Ratio: 33.7x
Processing over 2.8 billion insurance transaction records annually through one of the world's largest private databases, Verisk Analytics (NASDAQ: VRSK) provides data, analytics, and technology solutions that help insurance companies assess risk, detect fraud, and make better business decisions.
Why Are We Wary of VRSK?
- Sales trends were unexciting over the last five years as its 2.1% annual growth was below the typical business services company
At $243.06 per share, Verisk trades at 33.7x forward P/E. To fully understand why you should be careful with VRSK, check out our full research report (it’s free for active Edge members).
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 9 Market-Beating Stocks. 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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