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. That said, here are three low-volatility stocks to avoid and some better opportunities instead.
The Cheesecake Factory (CAKE)
Rolling One-Year Beta: 0.92
Celebrated for its delicious (and free) brown bread, gigantic portions, and delectable desserts, Cheesecake Factory (NASDAQ:CAKE) is an iconic American restaurant chain that also owns and operates a portfolio of separate restaurant brands.
Why Does CAKE Give Us Pause?
- Lagging same-store sales over the past two years suggest it might have to change its pricing and marketing strategy to stimulate demand
- Estimated sales growth of 3.9% for the next 12 months implies demand will slow from its six-year trend
- 6× net-debt-to-EBITDA ratio shows it’s overleveraged and increases the probability of shareholder dilution if things turn unexpectedly
The Cheesecake Factory is trading at $50.51 per share, or 12.7x forward P/E. Check out our free in-depth research report to learn more about why CAKE doesn’t pass our bar.
Dine Brands (DIN)
Rolling One-Year Beta: 0.85
Operating a franchise model, Dine Brands (NYSE:DIN) is a casual restaurant chain that owns the Applebee’s and IHOP banners.
Why Should You Dump DIN?
- Disappointing same-store sales over the past two years show customers aren’t responding well to its menu offerings and dining experience
- Efficiency has decreased over the last year as its operating margin fell by 6.7 percentage points
- 7× net-debt-to-EBITDA ratio makes lenders less willing to extend additional capital, potentially necessitating dilutive equity offerings
At $32.18 per share, Dine Brands trades at 6.8x forward P/E. To fully understand why you should be careful with DIN, check out our full research report (it’s free for active Edge members).
Hertz (HTZ)
Rolling One-Year Beta: -0.11
Started with a dozen Model T Fords, Hertz (NASDAQ:HTZ) is a global car rental company providing vehicle rental services to leisure and business travelers.
Why Is HTZ Risky?
- Flat unit sales over the past two years show it’s struggled to increase its sales volumes and had to rely on price increases
- Waning returns on capital imply its previous profit engines are losing steam
- High net-debt-to-EBITDA ratio of 9× could force the company to raise capital at unfavorable terms if market conditions deteriorate
Hertz’s stock price of $5.20 implies a valuation ratio of 106.2x forward EV-to-EBITDA. Check out our free in-depth research report to learn more about why HTZ doesn’t pass our bar.
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