Expensive stocks often command premium valuations because the market thinks their business models are exceptional. However, the downside is that high expectations are already baked into their prices, leaving little room for error if they stumble even slightly.
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. Keeping that in mind, here is one high-flying stock with strong fundamentals and two with big downside risk.
Two High-Flying Stocks to Sell:
Sonos (SONO)
Forward P/E Ratio: 50.5x
A pioneer in connected home audio systems, Sonos (NASDAQ: SONO) offers a range of premium wireless speakers and sound systems.
Why Are We Out on SONO?
- Products and services have few die-hard fans as sales have declined by 6.3% annually over the last two years
- Persistent operating margin losses suggest the business manages its expenses poorly
- Push for growth has led to negative returns on capital, signaling value destruction
Sonos is trading at $10.41 per share, or 50.5x forward P/E. Dive into our free research report to see why there are better opportunities than SONO.
Mercury Systems (MRCY)
Forward P/E Ratio: 74.7x
Founded in 1981, Mercury Systems (NASDAQ: MRCY) specializes in providing processing subsystems and components for primarily defense applications.
Why Is MRCY Risky?
- Organic sales performance over the past two years indicates the company may need to make strategic adjustments or rely on M&A to catalyze faster growth
- Earnings per share fell by 28% annually over the last five years while its revenue grew, partly because it diluted shareholders
- Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results
At $51.54 per share, Mercury Systems trades at 74.7x forward P/E. Check out our free in-depth research report to learn more about why MRCY doesn’t pass our bar.
One High-Flying Stock to Watch:
Doximity (DOCS)
Forward P/S Ratio: 19.6x
Founded in 2010 and named for a combination of “docs” and “proximity”, Doximity (NYSE: DOCS) is the leading social network for U.S. medical professionals.
Why Does DOCS Catch Our Eye?
- Average billings growth of 23.5% over the last year enhances its liquidity and shows there is steady demand for its products
- Software platform has product-market fit given the rapid recovery of its customer acquisition costs
- Impressive free cash flow profitability enables the company to fund new investments or reward investors with share buybacks/dividends
Doximity’s stock price of $60.02 implies a valuation ratio of 19.6x forward price-to-sales. Is now the time to initiate a position? See for yourself in our full research report, it’s free.
Stocks We Like Even More
Trump’s April 2024 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 5 Growth Stocks for this month. 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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