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.
Navigating these stocks isn’t easy, which is why StockStory helps you find Comfort In Chaos. That said, here is one volatile stock with massive upside potential and two that could just as easily collapse.
Two Stocks to Sell:
Hillenbrand (HI)
Rolling One-Year Beta: 2.11
Hillenbrand, Inc. (NYSE: HI) is an industrial company that designs, manufactures, and sells highly engineered processing equipment and solutions for various industries.
Why Are We Out on HI?
- Annual sales declines of 2.7% for the past two years show its products and services struggled to connect with the market during this cycle
- Incremental sales over the last five years were less profitable as its earnings per share were flat while its revenue grew
- Free cash flow margin shrank by 16.4 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
At $31.89 per share, Hillenbrand trades at 12.4x forward P/E. Dive into our free research report to see why there are better opportunities than HI.
HP (HPQ)
Rolling One-Year Beta: 1.43
Born from the legendary Silicon Valley garage startup founded by Bill Hewlett and Dave Packard in 1939, HP (NYSE:HPQ) designs and sells personal computers, printers, and related technology products and services to consumers, businesses, and enterprises worldwide.
Why Do We Think HPQ Will Underperform?
- Products and services are facing end-market challenges during this cycle, as seen in its flat sales over the last five years
- Earnings per share fell by 2.8% annually over the last two years while its revenue grew, showing its incremental sales were much less profitable
- Free cash flow margin shrank by 4.1 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
HP is trading at $25.14 per share, or 8.2x forward P/E. Read our free research report to see why you should think twice about including HPQ in your portfolio, it’s free for active Edge members.
One Stock to Buy:
Nvidia (NVDA)
Rolling One-Year Beta: 1.99
Founded in 1993 by Jensen Huang and two former Sun Microsystems engineers, Nvidia (NASDAQ:NVDA) is a leading fabless designer of chips used in gaming, PCs, data centers, automotive, and a variety of end markets.
Why Are We Backing NVDA?
- Annual revenue growth of 104% over the past two years was outstanding, reflecting market share gains this cycle
- Performance over the past five years was turbocharged by share buybacks, which enabled its earnings per share to grow faster than its revenue
- NVDA is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders, and its improved cash conversion implies it’s becoming a less capital-intensive business
Nvidia’s stock price of $179.91 implies a valuation ratio of 26.1x forward P/E. Is now the right time to buy? See for yourself in our in-depth research report, it’s free for active Edge members.