Market swings can be tough to stomach, and volatile stocks often experience exaggerated moves in both directions. While many thrive during risk-on environments, many also struggle to maintain investor confidence when the ride gets bumpy.
These stocks can be a rollercoaster, and StockStory is here to guide you through the ups and downs. Keeping that in mind, here are three volatile stocks to avoid and some better opportunities instead.
PubMatic (PUBM)
Rolling One-Year Beta: 1.34
Powering billions of daily ad impressions across the open internet, PubMatic (NASDAQ:PUBM) operates a technology platform that helps publishers maximize revenue from their digital advertising inventory while giving advertisers more control and transparency.
Why Should You Dump PUBM?
- Annual revenue growth of 5.2% over the last three years was well below our standards for the software sector
- Forecasted revenue decline of 7.1% for the upcoming 12 months implies demand will fall off a cliff
- Efficiency has decreased over the last year as its operating margin fell by 5 percentage points
At $8.40 per share, PubMatic trades at 1.5x forward price-to-sales. To fully understand why you should be careful with PUBM, check out our full research report (it’s free).
Genesco (GCO)
Rolling One-Year Beta: 2.12
Spanning a broad range of styles, brands, and prices, Genesco (NYSE:GCO) sells footwear, apparel, and accessories through multiple brands and banners.
Why Is GCO Risky?
- Lagging same-store sales over the past two years suggest it might have to change its pricing and marketing strategy to stimulate demand
- 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
Genesco’s stock price of $25.69 implies a valuation ratio of 16.3x forward P/E. If you’re considering GCO for your portfolio, see our FREE research report to learn more.
GXO Logistics (GXO)
Rolling One-Year Beta: 1.10
With notable customers such as Nike and Apple, GXO (NYSE:GXO) manages outsourced supply chains and warehousing for various companies.
Why Does GXO Fall Short?
- 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 fell by 2.2% annually over the last two years while its revenue grew, showing its incremental sales were much less profitable
- High net-debt-to-EBITDA ratio of 6× could force the company to raise capital at unfavorable terms if market conditions deteriorate
GXO Logistics is trading at $52.55 per share, or 18.9x forward P/E. Check out our free in-depth research report to learn more about why GXO doesn’t pass our bar.
Stocks We Like More
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