A stock with low volatility can be reassuring, but it doesn’t always mean strong long-term performance. Investors who prioritize stability may miss out on higher-reward opportunities elsewhere.
Luckily for you, StockStory helps you navigate which companies are truly worth holding. Keeping that in mind, here are three low-volatility stocks to avoid and some better opportunities instead.
SolarEdge (SEDG)
Rolling One-Year Beta: 0.65
Established in 2006, SolarEdge (NASDAQ: SEDG) creates advanced systems to improve the efficiency of solar panels.
Why Do We Pass on SEDG?
- Demand for its offerings was relatively low as its number of megawatts shipped has underwhelmed
- Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
- Unfavorable liquidity position could lead to additional equity financing that dilutes shareholders
At $40.07 per share, SolarEdge trades at 1.8x forward price-to-sales. Read our free research report to see why you should think twice about including SEDG in your portfolio.
Omnicom Group (OMC)
Rolling One-Year Beta: 0.95
With a vast network of creative agencies that helped craft some of the most memorable ad campaigns in history, Omnicom Group (NYSE: OMC) is a strategic holding company that provides advertising, marketing, and communications services to many of the world's largest companies.
Why Are We Hesitant About OMC?
- Organic revenue growth fell short of our benchmarks over the past two years and implies it may need to improve its products, pricing, or go-to-market strategy
- Free cash flow margin dropped by 7.6 percentage points over the last five years, implying the company became more capital intensive as competition picked up
- Diminishing returns on capital suggest its earlier profit pools are drying up
Omnicom Group is trading at $79.20 per share, or 8.7x forward P/E. Check out our free in-depth research report to learn more about why OMC doesn’t pass our bar.
Nasdaq (NDAQ)
Rolling One-Year Beta: 0.86
Originally founded in 1971 as the world's first electronic stock market, Nasdaq (NASDAQ: NDAQ) operates global exchanges and provides technology, data, and corporate services that help companies, investors, and financial institutions navigate capital markets.
Why Does NDAQ Worry Us?
- Performance over the past two years shows its incremental sales were less profitable, as its 9.2% annual earnings per share growth trailed its revenue gains
Nasdaq’s stock price of $88.82 implies a valuation ratio of 24.2x forward P/E. If you’re considering NDAQ for your portfolio, see our FREE research report to learn more.
High-Quality Stocks for All Market Conditions
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