Nasdaq
华尔街日报3 Low-Volatility Stocks Walking a Fine Line
Low-volatility stocks may offer stability, but that often comes at the cost of slower growth and the upside potential of more dynamic companies.
Finding the right balance between safety and returns isn’t easy, which is why StockStory is here to help. Keeping that in mind, here are three low-volatility stocks to avoid and some better opportunities instead.
GameStop (GME)
Rolling One-Year Beta: 0.28
Drawing gaming fans with demo units set up with the latest releases, GameStop (NYSE:GME) sells new and used video games, consoles, and accessories, as well as pop culture merchandise.
Why Do We Think GME Will Underperform?
- GameStop’s brick-and-mortar engine keeps stalling as gamers migrate to digital downloads, and management is closing more outlets after shuttering hundreds of stores last year
- The share price remains an unpredictable meme-stock roller-coaster, and the purchase of thousands of Bitcoins have fueled huge swings
- On the bright side, the company has a large cash pile that gives CEO Ryan Cohen room to buy more Bitcoin or fund its collectibles and trading-card push
At $23.22 per share, GameStop trades at 26.2x forward P/E. Read our free research report to see why you should think twice about including GME in your portfolio.
Genuine Parts (GPC)
Rolling One-Year Beta: 0.59
Largely targeting the professional customer, Genuine Parts (NYSE:GPC) sells auto and industrial parts such as batteries, belts, bearings, and machine fluids.
Why Does GPC Fall Short?
- Scale is a double-edged sword because it limits the company’s growth potential compared to its smaller competitors, as reflected in its below-average annual revenue increases of 4% for the last three years
- Disappointing same-store sales over the past two years show customers aren’t responding well to its product selection and store experience
- Free cash flow margin shrank by 3.3 percentage points over the last year, suggesting the company is consuming more capital to stay competitive
Genuine Parts’s stock price of $129.50 implies a valuation ratio of 15.6x forward P/E. Dive into our free research report to see why there are better opportunities than GPC.
Zurn Elkay (ZWS)
Rolling One-Year Beta: 0.87
Claiming to have saved more than 30 billion gallons of water, Zurn Elkay (NYSE:ZWS) provides water management solutions to various industries.
Why Are We Wary of ZWS?
- 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 have contracted by 4.5% annually over the last five years, a headwind for returns as stock prices often echo long-term EPS performance
- 16.5 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
Zurn Elkay is trading at $47.45 per share, or 29.8x forward P/E. To fully understand why you should be careful with ZWS, check out our full research report (it’s free for active Edge members).
High-Quality Stocks for All Market Conditions
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