Expensive stocks typically earn their valuations through superior growth rates that other companies simply can’t match. The flip side though is that these lofty expectations make them particularly susceptible to drawdowns when market sentiment shifts.
Determining whether a company’s quality justifies its price causes headaches for nearly all investors, which is why we started StockStory - to help you separate the real opportunities from the speculative ones. That said, here is one high-flying stock expanding its competitive advantage and two where the price is not right.
Two High-Flying Stocks to Sell:
IPG Photonics (IPGP)
Forward P/E Ratio: 41x
Both a designer and manufacturer of its products, IPG Photonics (NASDAQ:IPGP) is a provider of high-performance fiber lasers used for cutting, welding, and processing raw materials.
Why Is IPGP Risky?
- Sales tumbled by 5.3% annually over the last five years, showing market trends are working against its favor during this cycle
- Inability to adjust its cost structure while its revenue declined over the last five years led to a 42.4 percentage point drop in the company’s operating margin
- Sales were less profitable over the last five years as its earnings per share fell by 19.8% annually, worse than its revenue declines
At $66.65 per share, IPG Photonics trades at 41x forward P/E. Check out our free in-depth research report to learn more about why IPGP doesn’t pass our bar.
West Pharmaceutical Services (WST)
Forward P/E Ratio: 33x
Founded in 1923 and serving as a critical link in the pharmaceutical supply chain, West Pharmaceutical Services (NYSE:WST) manufactures specialized packaging, containment systems, and delivery devices for injectable drugs and healthcare products.
Why Are We Cautious About WST?
- Sales stagnated over the last two years and signal the need for new growth strategies
- Day-to-day expenses have swelled relative to revenue over the last two years as its adjusted operating margin fell by 5.7 percentage points
- Waning returns on capital imply its previous profit engines are losing steam
West Pharmaceutical Services’s stock price of $210.85 implies a valuation ratio of 33x forward P/E. Read our free research report to see why you should think twice about including WST in your portfolio.
One High-Flying Stock to Watch:
Republic Services (RSG)
Forward P/E Ratio: 36.7x
Processing several million tons of recyclables annually, Republic (NYSE:RSG) provides waste management services for residences, companies, and municipalities.
Why Does RSG Catch Our Eye?
- Annual revenue growth of 9.3% over the last five years beat the sector average and underscores the unique value of its offerings
- Excellent operating margin of 18.6% highlights the efficiency of its business model, and its profits increased over the last five years as it scaled
- RSG is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders
Republic Services is trading at $257.29 per share, or 36.7x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.
While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like our Top 5 Strong Momentum 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-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today for free.