In This Article:
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. Keeping that in mind, here are two high-flying stocks expanding their competitive advantages and one with big downside risk.
One High-Flying Stock to Sell:
Texas Instruments (TXN)
Forward P/E Ratio: 32.7x
Headquartered in Dallas, Texas since the 1950s, Texas Instruments (NASDAQ:TXN) is the world’s largest producer of analog semiconductors.
Why Are We Cautious About TXN?
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Sales tumbled by 9.3% annually over the last two years, showing market trends are working against its favor during this cycle
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Day-to-day expenses have swelled relative to revenue over the last five years as its operating margin fell by 8.4 percentage points
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Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 32.1 percentage points
At $186.78 per share, Texas Instruments trades at 32.7x forward P/E. Read our free research report to see why you should think twice about including TXN in your portfolio, it’s free.
Two High-Flying Stocks to Buy:
CrowdStrike (CRWD)
Forward P/S Ratio: 22.7x
Founded by George Kurtz, the former CTO of the antivirus company McAfee, CrowdStrike (NASDAQ:CRWD) provides cybersecurity software that protects companies from breaches and helps them detect and respond to cyber attacks.
Why Are We Backing CRWD?
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Customers view its software as mission-critical to their operations as its ARR has averaged 29% growth over the last year
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Estimated revenue growth of 21.1% for the next 12 months implies its momentum over the last three years will continue
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Robust free cash flow margin of 27% gives it many options for capital deployment
CrowdStrike’s stock price of $432.36 implies a valuation ratio of 22.7x forward price-to-sales. Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.
O'Reilly (ORLY)
Forward P/E Ratio: 30.3x
Serving both the DIY customer and professional mechanic, O’Reilly Automotive (NASDAQ:ORLY) is an auto parts and accessories retailer that sells everything from fuel pumps to car air fresheners to mufflers.
Why Is ORLY a Good Business?
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Same-store sales growth averaged 4.5% over the past two years, showing it’s bringing new and repeat shoppers into its stores
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Unique assortment of products and pricing power result in a best-in-class gross margin of 51.3%
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ORLY is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders