"You get what you pay for" often applies to expensive stocks with best-in-class business models and execution. While their quality can sometimes justify the premium, they typically experience elevated volatility during market downturns when expectations change.
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 three high-flying stocks where the price is not right and some other investments you should look into instead.
Peloton (PTON)
Forward P/E Ratio: 46.3x
Started as a Kickstarter campaign, Peloton (NASDAQ: PTON) is a fitness technology company known for its at-home exercise equipment and interactive online workout classes.
Why Do We Steer Clear of PTON?
- Performance surrounding its connected fitness subscribers has lagged its peers
- Performance over the past five years shows each sale was less profitable, as its earnings per share fell by 16.5% annually
- Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital
Peloton is trading at $6.50 per share, or 46.3x forward P/E. Dive into our free research report to see why there are better opportunities than PTON.
Himax (HIMX)
Forward P/E Ratio: 60.7x
Taiwan-based Himax Technologies (NASDAQ:HIMX) is a leading manufacturer of display driver chips and timing controllers used in TVs, laptops, and mobile phones.
Why Do We Pass on HIMX?
- Annual sales declines of 6% for the past two years show its products and services struggled to connect with the market during this cycle
- Projected sales decline of 4.4% over the next 12 months indicates demand will continue deteriorating
- Expenses have increased as a percentage of revenue over the last five years as its operating margin fell by 22.9 percentage points
Himax’s stock price of $8.85 implies a valuation ratio of 60.7x forward P/E. To fully understand why you should be careful with HIMX, check out our full research report (it’s free for active Edge members).
Root (ROOT)
Forward P/B Ratio: 4.2x
Pioneering a data-driven approach that rewards good driving habits, Root (NASDAQ:ROOT) is a technology-driven auto insurance company that uses mobile apps to acquire customers and data science to price policies based on individual driving behavior.
Why Is ROOT Not Exciting?
- Book value per share tumbled by 158% annually over the last five years, showing insurance sector trends are working against its favor during this cycle
- Negative return on equity shows management lost money while trying to expand the business
At $81.09 per share, Root trades at 4.2x forward P/B. Check out our free in-depth research report to learn more about why ROOT doesn’t pass our bar.
Stocks We Like More
If your portfolio success hinges on just 4 stocks, your wealth is built on fragile ground. You have a small window to secure high-quality assets before the market widens and these prices disappear.
Don’t wait for the next volatility shock. Check out our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 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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