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.
Finding the right balance between price and quality can challenge even the most skilled investors. Luckily for you, we started StockStory to help you identify the real opportunities. Keeping that in mind, here is one high-flying stock with strong fundamentals and two facing an uphill battle.
Two High-Flying Stocks to Sell:
Lincoln Educational (LINC)
Forward P/E Ratio: 29.6x
Established in 1946, Lincoln Educational (NASDAQ:LINC) is a provider of specialized technical training in the United States, offering career-oriented programs to provide practical skills required in the workforce.
Why Is LINC Risky?
- Number of enrolled students has disappointed over the past two years, indicating weak demand for its offerings
- Capital intensity will likely increase as its free cash flow margin is anticipated to drop by 5.3 percentage points over the next year
- Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results
Lincoln Educational is trading at $30.22 per share, or 29.6x forward P/E. If you’re considering LINC for your portfolio, see our FREE research report to learn more.
Mayville Engineering (MEC)
Forward P/E Ratio: 35.3x
Originally founded solely on tool and die manufacturing, Mayville Engineering Company (NYSE:MEC) specializes in metal fabrication, tube bending, and welding to be used in various industries.
Why Do We Think MEC Will Underperform?
- Sales tumbled by 3.7% annually over the last two years, showing market trends are working against it during this cycle
- Competitive supply chain dynamics and steep production costs are reflected in its low gross margin of 12.2%
- Revenue growth over the past five years was nullified by the company’s new share issuances as its earnings per share fell by 17% annually
Mayville Engineering’s stock price of $23.39 implies a valuation ratio of 35.3x forward P/E. Check out our free in-depth research report to learn more about why MEC doesn’t pass our bar.
One High-Flying Stock to Watch:
e.l.f. Beauty (ELF)
Forward P/E Ratio: 29.9x
Short for "eyes, lips, face", e.l.f. Beauty (NYSE:ELF) is a developer of high-quality beauty products at accessible price points.
Why Is ELF on Our Radar?
- Impressive 37.9% annual revenue growth over the last three years indicates it’s winning market share
- Unique products and pricing power lead to a best-in-class gross margin of 72.8%
- Free cash flow margin increased by 5.8 percentage points over the last year, giving the company more capital to invest or return to shareholders
At $92.01 per share, e.l.f. Beauty trades at 29.9x forward P/E. Is now a good time to buy? See for yourself in our in-depth research report, it’s free.
High-Quality Stocks for All Market Conditions
WHILE YOU’RE HERE: Top 9 Market-Beating Stocks. The best stocks don’t just beat the market once. They do it again. And again. Robust revenue growth, rising free cash flow, returns on capital that leave their competition in the dust. The market has already rewarded these businesses.
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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,552% between June 2020 and June 2025). Find your next big winner with StockStory today.