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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.

Separating true intrinsic value from speculation isn’t easy, especially during bull markets. That’s where StockStory comes in - to help you find high-quality companies that will stand the test of time. That said, here is one high-flying stock to hold for the long term and two climbing an uphill battle.

Two High-Flying Stocks to Sell:

Planet Fitness (PLNT)

Forward P/E Ratio: 32.4x

Founded by two brothers who purchased a struggling gym, Planet Fitness (NYSE:PLNT) is a gym franchise that caters to casual fitness users by providing a friendly and inclusive atmosphere.

Why Are We Cautious About PLNT?

1. Poor same-store sales performance over the past two years indicates it’s having trouble bringing new shoppers into its stores

2. Estimated sales growth of 10.5% for the next 12 months implies demand will slow from its two-year trend

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

Planet Fitness is trading at $94.77 per share, or 32.4x forward P/E. Check out our free in-depth research report to learn more about why PLNT doesn’t pass our bar.

Kratos (KTOS)

Forward P/E Ratio: 60.4x

Established with a commitment to supporting national security, Kratos (NASDAQ:KTOS) is a provider of advanced engineering, technology, and security solutions tailored for critical national security applications.

Why Do We Think Twice About KTOS?

1. Increased cash burn over the last five years raises questions about the return timeline for its investments

2. ROIC of 3.8% reflects management’s challenges in identifying attractive investment opportunities, and its shrinking returns suggest its past profit sources are losing steam

3. Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions

Kratos’s stock price of $34.95 implies a valuation ratio of 60.4x forward P/E. To fully understand why you should be careful with KTOS, check out our full research report (it’s free).

One High-Flying Stock to Buy:

Monster (MNST)

Forward P/E Ratio: 32.6x

Founded in 2002 as a natural soda and juice company, Monster Beverage (NASDAQ:MNST) is a pioneer of the energy drink category, and its Monster Energy brand targets a young, active demographic.

Why Are We Backing MNST?

1. Highly efficient business model is illustrated by its impressive 27% operating margin

2. Strong free cash flow margin of 21.6% enables it to reinvest or return capital consistently, and its improved cash conversion implies it’s becoming a less capital-intensive business

3. Market-beating returns on capital illustrate that management has a knack for investing in profitable ventures