A highly volatile stock can deliver big gains – or just as easily wipe out a portfolio if things go south. While some investors embrace risk, mistakes can be costly for those who aren’t prepared.
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 with massive upside potential and two best left to the gamblers.
Two Stocks to Sell:
Polaris (PII)
Rolling One-Year Beta: 1.09
Founded in 1954, Polaris (NYSE:PII) designs and manufactures high-performance off-road vehicles, snowmobiles, and motorcycles.
Why Do We Think PII Will Underperform?
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Muted 1.1% annual revenue growth over the last five years shows its demand lagged behind its consumer discretionary peers
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Capital intensity will likely ramp up in the next year as its free cash flow margin is expected to contract by 5.3 percentage points
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Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
Polaris’s stock price of $66.22 implies a valuation ratio of 62.3x forward P/E.
Sealed Air (SEE)
Rolling One-Year Beta: 1.29
Founded in 1960, Sealed Air Corporation (NYSE: SEE) specializes in the development and production of protective and food packaging solutions, serving a variety of industries.
Why Do We Steer Clear of SEE?
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Flat unit sales over the past two years indicate demand is soft and that the company may need to revise its strategy
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Projected sales for the next 12 months are flat and suggest demand will be subdued
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Eroding returns on capital suggest its historical profit centers are aging
At $41.44 per share, Sealed Air trades at 12.8x forward P/E.
One Stock to Watch:
Energy Recovery (ERII)
Rolling One-Year Beta: 1.35
Having saved far more than a trillion gallons of water, Energy Recovery (NASDAQ:ERII) provides energy recovery devices to the water treatment, oil and gas, and chemical processing sectors.
Why Are We Fans of ERII?
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Offerings are difficult to replicate at scale and lead to a best-in-class gross margin of 67.6%
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Performance over the past two years was turbocharged by share buybacks, which enabled its earnings per share to grow faster than its revenue
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Free cash flow margin increased by 6.3 percentage points over the last five years, giving the company more capital to invest or return to shareholders
Energy Recovery is trading at $13.87 per share, or 16.2x forward P/E. Is now the time to initiate a position?
Stocks We Like Even More
If your portfolio success hinges on just 4 stocks, your wealth is built on fragile ground. You have a small window to secure high-quality assets before the market widens and these prices disappear.