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. That said, here is one volatile stock that could reward patient investors and two that might not be worth the risk.
Two Stocks to Sell:
AeroVironment (AVAV)
Rolling One-Year Beta: 1.30
Focused on the future of autonomous military combat, AeroVironment (NASDAQ: AVAV) specializes in advanced unmanned aircraft systems and electric vehicle charging solutions.
Why Are We Hesitant About AVAV?
- Expenses have increased as a percentage of revenue over the last five years as its operating margin fell by 7.5 percentage points
- 24.6 percentage point decline in its free cash flow margin over the last five years reflects the company’s increased investments to defend its market position
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
At $146.28 per share, AeroVironment trades at 32.5x forward price-to-earnings. Read our free research report to see why you should think twice about including AVAV in your portfolio.
ePlus (PLUS)
Rolling One-Year Beta: 1.55
Starting as a financing company in 1990 before evolving into a full-service technology provider, ePlus (NASDAQ: PLUS) provides comprehensive IT solutions, professional services, and financing options to help organizations optimize their technology infrastructure and supply chain processes.
Why Do We Think Twice About PLUS?
- 2.4% annual revenue growth over the last two years was slower than its business services peers
- Falling earnings per share over the last two years has some investors worried as stock prices ultimately follow EPS over the long term
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 4.4% for the last five years
ePlus’s stock price of $73.01 implies a valuation ratio of 11.4x forward price-to-earnings. To fully understand why you should be careful with PLUS, check out our full research report (it’s free).
One Stock to Buy:
Datadog (DDOG)
Rolling One-Year Beta: 1.39
Named after a database the founders had to painstakingly look after at their previous company, Datadog (NASDAQ: DDOG) is a software-as-a-service platform that makes it easier to monitor cloud infrastructure and applications.
Why Will DDOG Outperform?
- ARR growth averaged 29.3% over the last year, showing customers are willing to take multi-year bets on its offerings
- Fast payback periods on sales and marketing expenses allow the company to invest heavily and onboard many customers concurrently
- DDOG is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders
Datadog is trading at $95.84 per share, or 10.7x forward price-to-sales. Is now a good time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.
While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio 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 Sterling Infrastructure (+1,096% five-year return). Find your next big winner with StockStory today for free.
