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. That said, here are two high-flying stocks expanding their competitive advantages and one where the price is not right.
One High-Flying Stock to Sell:
Bio-Techne (TECH)
Forward P/E Ratio: 30.2x
With a catalog of hundreds of thousands of specialized biological products used in laboratories worldwide, Bio-Techne (NASDAQ:TECH) develops and manufactures specialized reagents, instruments, and services that help researchers study biological processes and enable diagnostic testing and cell therapy development.
Why Are We Hesitant About TECH?
- 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
- Revenue base of $1.20 billion puts it at a disadvantage compared to larger competitors exhibiting economies of scale
- Expenses have increased as a percentage of revenue over the last two years as its adjusted operating margin fell by 5.5 percentage points
At $60.61 per share, Bio-Techne trades at 30.2x forward price-to-earnings. Dive into our free research report to see why there are better opportunities than TECH.
Two High-Flying Stocks to Watch:
Veeva Systems (VEEV)
Forward P/S Ratio: 12.9x
Built on top of Salesforce as one of the first vertical-focused cloud platforms, Veeva (NYSE:VEEV) provides data and customer relationship management (CRM) software for organizations in the life sciences industry.
Why Should VEEV Be on Your Watchlist?
- User-friendly software enables clients to ramp up spending quickly, leading to the speedy recovery of customer acquisition costs
- Disciplined cost controls and effective management resulted in a strong trailing 12-month operating margin of 25.2%, and it turbocharged its profits by achieving some fixed cost leverage
- Impressive free cash flow profitability enables the company to fund new investments or reward investors with share buybacks/dividends
Veeva Systems is trading at $239.91 per share, or 12.9x forward price-to-sales. Is now the right time to buy? Find out in our full research report, it’s free.
Monolithic Power Systems (MPWR)
Forward P/E Ratio: 35.4x
Founded in 1997 by its longtime CEO Michael Hsing, Monolithic Power Systems (NASDAQ:MPWR) is an analog and mixed signal chipmaker that specializes in power management chips meant to minimize total energy consumption.
Why Is MPWR a Top Pick?
- Impressive 10.9% annual revenue growth over the last two years indicates it’s winning market share this cycle
- Strong free cash flow margin of 30.4% enables it to reinvest or return capital consistently, and its improved cash conversion implies it’s becoming a less capital-intensive business
- Industry-leading 46.6% return on capital demonstrates management’s skill in finding high-return investments
Monolithic Power Systems’s stock price of $603 implies a valuation ratio of 35.4x forward price-to-earnings. Is now the time to initiate a position? See for yourself in our in-depth research report, it’s free.
Stocks We Like Even More
The Trump trade may have passed, but rates are still dropping and inflation is still cooling. Opportunities are ripe for those ready to act - and we’re here to help you pick them.
Get started by checking out our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.
Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Axon (+711% five-year return). Find your next big winner with StockStory today for free.