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.
Navigating these stocks isn’t easy, which is why StockStory helps you find Comfort In Chaos. Keeping that in mind, here are three volatile stocks to avoid and some better opportunities instead.
BJ's (BJRI)
Rolling One-Year Beta: 1.15
Founded in 1978 in California, BJ’s Restaurants (NASDAQ:BJRI) is a chain of restaurants whose menu features classic American dishes, often with a twist.
Why Do We Avoid BJRI?
- Weak same-store sales trends over the past two years suggest there may be few opportunities in its core markets to open new restaurants
- Gross margin of 14.7% is below its competitors, leaving less money for marketing and promotions
- Underwhelming 2.6% return on capital reflects management’s difficulties in finding profitable growth opportunities
At $31.94 per share, BJ's trades at 15.2x forward P/E. Check out our free in-depth research report to learn more about why BJRI doesn’t pass our bar.
THOR Industries (THO)
Rolling One-Year Beta: 1.16
Created through the acquisition and merger of various RV manufacturers, THOR Industries manufactures and sells a range of recreational vehicles, including motorhomes and travel trailers, catering to consumers seeking the freedom and comfort of the RV lifestyle.
Why Are We Out on THO?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 7.2% annually over the last two years
- Earnings per share have dipped by 16.5% annually over the past two years, which is concerning because stock prices follow EPS over the long term
- Diminishing returns on capital suggest its earlier profit pools are drying up
THOR Industries’s stock price of $105.72 implies a valuation ratio of 24.8x forward P/E. To fully understand why you should be careful with THO, check out our full research report (it’s free).
Oracle (ORCL)
Rolling One-Year Beta: 1.59
Starting as a database company in 1977 and now powering mission-critical systems across the globe, Oracle (NYSE:ORCL) provides enterprise software and hardware products and services that help businesses manage their information technology needs.
Why Is ORCL Risky?
- Customers had second thoughts about committing to its platform over the last year as its average billings growth of 9.2% underwhelmed
- Cash-burning history makes us doubt the long-term viability of its business model
- Short cash runway increases the probability of a capital raise that dilutes existing shareholders
Oracle is trading at $290 per share, or 12x forward price-to-sales. Read our free research report to see why you should think twice about including ORCL in your portfolio.
Stocks We Like More
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