Low-volatility stocks may offer stability, but that often comes at the cost of slower growth and the upside potential of more dynamic companies.
Luckily for you, StockStory helps you navigate which companies are truly worth holding. That said, here are three low-volatility stocks that don’t make the cut and some better opportunities instead.
ABM (ABM)
Rolling One-Year Beta: 0.77
With roots dating back to 1909 as a window washing company, ABM Industries (NYSE: ABM) provides integrated facility management, infrastructure, and mobility solutions across various sectors including commercial, manufacturing, education, and aviation.
Why Are We Cautious About ABM?
- Absence of organic revenue growth over the past two years suggests it may have to lean into acquisitions to drive its expansion
- Earnings per share were flat over the last two years while its revenue grew, showing its incremental sales were less profitable
- Investment activity picked up over the last five years, pressuring its weak free cash flow margin of 1.9%
ABM’s stock price of $42.21 implies a valuation ratio of 10.6x forward P/E. Read our free research report to see why you should think twice about including ABM in your portfolio.
SS&C (SSNC)
Rolling One-Year Beta: 0.73
Founded in 1986 as a bridge between technology and financial services, SS&C Technologies (NASDAQ: SSNC) provides software and software-enabled services that help financial firms and healthcare organizations automate complex business processes.
Why Are We Wary of SSNC?
- Costs have risen faster than its revenue over the last five years, causing its adjusted operating margin to decline by 1.2 percentage points
- Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 4.1 percentage points
- Underwhelming 6.6% return on capital reflects management’s difficulties in finding profitable growth opportunities
SS&C is trading at $88.75 per share, or 13.5x forward P/E. To fully understand why you should be careful with SSNC, check out our full research report (it’s free for active Edge members).
Provident Financial Services (PFS)
Rolling One-Year Beta: 0.88
Founded in 1839 and serving communities across New Jersey, Pennsylvania, and New York, Provident Financial Services (NYSE: PFS) operates a regional bank providing commercial, residential, and consumer lending alongside wealth management and insurance services.
Why Does PFS Worry Us?
- Weak unit economics are reflected in its net interest margin of 3.3%, one of the worst among bank companies
- Annual earnings per share growth of 2.2% underperformed its revenue over the last two years, showing its incremental sales were less profitable
- Products and services are facing significant credit quality challenges during this cycle as tangible book value per share has declined by 1.3% annually over the last two years
At $20.70 per share, Provident Financial Services trades at 1x forward P/B. Read our free research report to see why you should think twice about including PFS in your portfolio.
High-Quality Stocks for All Market Conditions
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