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.
Navigating these stocks isn’t easy, which is why StockStory helps you find Comfort In Chaos. Keeping that in mind, here is one volatile stock that could deliver huge gains and two that might not be worth the risk.
Two Stocks to Sell:
Allegro MicroSystems (ALGM)
Rolling One-Year Beta: 1.66
The result of a spinoff from Sanken in Japan, Allegro MicroSystems (NASDAQ:ALGM) is a designer of power management chips and distance sensors used in electric vehicles and data centers.
Why Do We Think ALGM Will Underperform?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 14.2% annually over the last two years
- Subpar operating margin of 6.1% has withered over the last five years, constraining its ability to invest in process improvements or effectively respond to new competitive threats
- Earnings per share fell by 17.2% annually over the last five years while its revenue grew, showing its incremental sales were much less profitable
At $31.05 per share, Allegro MicroSystems trades at 50.7x forward P/E. Dive into our free research report to see why there are better opportunities than ALGM.
El Pollo Loco (LOCO)
Rolling One-Year Beta: 1.20
With a name that translates into ‘The Crazy Chicken’, El Pollo Loco (NASDAQ:LOCO) is a fast food chain known for its citrus-marinated, fire-grilled chicken recipe that hails from the coastal town of Sinaloa, Mexico.
Why Are We Out on LOCO?
- Lagging same-store sales over the past two years suggest it might have to change its pricing and marketing strategy to stimulate demand
- Revenue base of $479.7 million puts it at a disadvantage compared to larger competitors exhibiting economies of scale
- Demand will likely be soft over the next 12 months as Wall Street’s estimates imply tepid growth of 4%
El Pollo Loco’s stock price of $10.42 implies a valuation ratio of 12.1x forward P/E. Check out our free in-depth research report to learn more about why LOCO doesn’t pass our bar.
One Stock to Buy:
Meta (META)
Rolling One-Year Beta: 1.34
Famously founded by Mark Zuckerberg in his Harvard dorm, Meta Platforms (NASDAQ:META) operates a collection of the largest social networks in the world - Facebook, Instagram, WhatsApp, and Messenger, along with its metaverse focused Reality Labs.
Why Will META Outperform?
- Customers are spending more money on its platform as its average revenue per user has increased by 14.5% annually over the last two years
- Performance over the past three years was turbocharged by share buybacks, which enabled its earnings per share to grow faster than its revenue
- META is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders
Meta is trading at $785.28 per share, or 16.8x forward EV/EBITDA. Is now the time to initiate a position? Find out in our full research report, it’s free.
Stocks We Like Even More
Trump’s April 2025 tariff bombshell triggered a massive market selloff, but stocks have since staged an impressive recovery, leaving those who panic sold on the sidelines.
Take advantage of the rebound by checking out our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today
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