In This Article:
Volatility cuts both ways - while it creates opportunities, it also increases risk, making sharp declines just as likely as big gains. This unpredictability can shake out even the most experienced investors.
These stocks can be a rollercoaster, and StockStory is here to guide you through the ups and downs. That said, here is one volatile stock that could deliver huge gains and two that might not be worth the risk.
Two Stocks to Sell:
Zillow (ZG)
Rolling One-Year Beta: 1.23
Founded by Expedia co-founders Lloyd Frink and Rich Barton, Zillow (NASDAQ:ZG) is the leading U.S. online real estate marketplace.
Why Do We Avoid ZG?
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Annual revenue declines of 7.6% over the last five years indicate problems with its market positioning
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Poor expense management has led to operating losses
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Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
Zillow’s stock price of $67.06 implies a valuation ratio of 36.5x forward P/E. Read our free research report to see why you should think twice about including ZG in your portfolio, it’s free.
Johnson Controls (JCI)
Rolling One-Year Beta: 1.33
Founded after patenting the electric room thermostat, Johnson Controls (NYSE:JCI) specializes in building products and technology solutions, including HVAC systems, fire and security systems, and energy storage.
Why Do We Pass on JCI?
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Organic sales performance over the past two years indicates the company may need to make strategic adjustments or rely on M&A to catalyze faster growth
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Estimated sales growth of 2.9% for the next 12 months is soft and implies weaker demand
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Low returns on capital reflect management’s struggle to allocate funds effectively
At $97.21 per share, Johnson Controls trades at 25.4x forward P/E. To fully understand why you should be careful with JCI, check out our full research report (it’s free).
One Stock to Watch:
DXP (DXPE)
Rolling One-Year Beta: 1.80
Founded during the emergence of Big Oil in Texas, DXP (NASDAQ:DXPE) provides pumps, valves, and other industrial components.
Why Could DXPE Be a Winner?
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Operating margin improvement of 5.6 percentage points over the last five years demonstrates its ability to scale efficiently
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Share repurchases have amplified shareholder returns as its annual earnings per share growth of 34.6% exceeded its revenue gains over the last two years
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Rising returns on capital show management is finding more attractive investment opportunities
DXP is trading at $89.76 per share, or 16.3x forward P/E. Is now the right time to buy? See for yourself in our full research report, it’s free.