A highly volatile stock can deliver big gains - or just as easily wipe out a portfolio if things go south. While some investors embrace risk, mistakes can be costly for those who aren’t prepared.
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 steer clear of and a few better alternatives.
Matson (MATX)
Rolling One-Year Beta: 1.21
Founded by a Swedish orphan, Matson (NYSE: MATX) is a provider of ocean transportation and logistics services.
Why Does MATX Give Us Pause?
- 4.3% annual revenue growth over the last two years was slower than its industrials peers
- Free cash flow margin shrank by 8.3 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
- Diminishing returns on capital suggest its earlier profit pools are drying up
At $162.18 per share, Matson trades at 12.1x forward P/E. Read our free research report to see why you should think twice about including MATX in your portfolio.
CDW (CDW)
Rolling One-Year Beta: 1.14
Serving as a crucial bridge between technology manufacturers and end users since 1984, CDW (NASDAQ: CDW) is a multi-brand provider of information technology solutions that helps businesses and public sector organizations select, implement, and manage hardware, software, and IT services.
Why Are We Cautious About CDW?
- The company has faced growth challenges as its 2.4% annual revenue increases over the last two years fell short of other business services companies
- Projected sales growth of 2.4% for the next 12 months suggests sluggish demand
- Earnings per share were flat over the last two years and fell short of the peer group average
CDW is trading at $126.63 per share, or 12.1x forward P/E. If you’re considering CDW for your portfolio, see our FREE research report to learn more.
ScanSource (SCSC)
Rolling One-Year Beta: 1.12
Operating as a crucial link in the technology supply chain since 1992, ScanSource (NASDAQ: SCSC) is a hybrid distributor that connects hardware, software, and cloud services from technology suppliers to resellers and business customers.
Why Does SCSC Worry Us?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 8.6% annually over the last two years
- Estimated sales growth of 3% for the next 12 months is soft and implies weaker demand
- Poor free cash flow margin of 2.6% for the last five years limits its freedom to invest in growth initiatives, execute share buybacks, or pay dividends
ScanSource’s stock price of $35.92 implies a valuation ratio of 8.3x forward P/E. To fully understand why you should be careful with SCSC, check out our full research report (it’s free).
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