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.
Navigating these stocks isn’t easy, which is why StockStory helps you find Comfort In Chaos. That said, here are three volatile stocks to avoid and some better opportunities instead.
SunOpta (STKL)
Rolling One-Year Beta: 1.23
Committed to clean-label foods, SunOpta (NASDAQ:STKL) is a sustainability-focused food and beverage company specializing in the sourcing, processing, and packaging of organic products.
Why Do We Think Twice About STKL?
- Sales tumbled by 4.2% annually over the last three years, showing consumer trends are working against its favor
- Revenue base of $742.7 million puts it at a disadvantage compared to larger competitors exhibiting economies of scale
- Easily substituted products (and therefore stiff competition) result in an inferior gross margin of 16% that must be offset through higher volumes
SunOpta’s stock price of $5.76 implies a valuation ratio of 29.2x forward P/E. If you’re considering STKL for your portfolio, see our FREE research report to learn more.
LSI (LYTS)
Rolling One-Year Beta: 1.28
Enhancing commercial environments, LSI (NASDAQ:LYTS) provides lighting and display solutions for businesses and retailers.
Why Is LYTS Not Exciting?
- Sales trends were unexciting over the last two years as its 4.5% annual growth was below the typical industrials company
- Issuance of new shares over the last two years caused its earnings per share growth of 2.7% to lag its revenue gains
- 5.9 percentage point decline in its free cash flow margin over the last five years reflects the company’s increased investments to defend its market position
LSI is trading at $16.40 per share, or 13x forward P/E. Read our free research report to see why you should think twice about including LYTS in your portfolio.
DistributionNOW (DNOW)
Rolling One-Year Beta: 1.28
Spun off from National Oilwell Varco, DistributionNOW (NYSE:DNOW) provides distribution and supply chain solutions for the energy and industrial end markets.
Why Do We Steer Clear of DNOW?
- Sales tumbled by 2.8% annually over the last five years, showing market trends are working against its favor during this cycle
- Earnings per share have contracted by 6.3% annually over the last two years, a headwind for returns as stock prices often echo long-term EPS performance
- Free cash flow margin shrank by 4.8 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
At $14.56 per share, DistributionNOW trades at 10x forward EV-to-EBITDA. Check out our free in-depth research report to learn more about why DNOW doesn’t pass our bar.
High-Quality Stocks for All Market Conditions
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