“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.
Separating true intrinsic value from speculation isn’t easy, especially during bull markets. That’s where StockStory comes in – to help you find high-quality companies that will stand the test of time. That said, here are two high-flying stocks expanding their competitive advantages and one with big downside risk.
Forward P/E Ratio: 60.5x
Founded in 1954, Polaris (NYSE:PII) designs and manufactures high-performance off-road vehicles, snowmobiles, and motorcycles.
Why Are We Out on PII?
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Sales tumbled by 11.9% annually over the last two years, showing consumer trends are working against its favor
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Free cash flow margin is forecasted to shrink by 5.3 percentage points in the coming year, suggesting the company will consume more capital to keep up with its competitors
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Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability
Polaris is trading at $65.88 per share, or 60.5x forward P/E. Check out our free in-depth research report to learn more about why PII doesn’t pass our bar.
Forward P/E Ratio: 55.6x
Starting as a student loan refinancing company founded by Stanford business school students in 2011, SoFi Technologies (NASDAQ:SOFI) operates a digital financial platform offering lending, banking, investing, and other financial services to help members borrow, save, spend, invest, and protect their money.
Why Will SOFI Outperform?
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Market share has increased this cycle as its 30.1% annual revenue growth over the last two years was exceptional
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Incremental sales significantly boosted profitability as its annual earnings per share growth of 92.5% over the last two years outstripped its revenue performance
SoFi’s stock price of $32.01 implies a valuation ratio of 55.6x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free for active Edge members.
Forward P/E Ratio: 46.4x
With its technology protecting workers in over 130 countries and equipment used in 80% of cancer centers worldwide, Mirion Technologies (NYSE:MIR) provides radiation detection, measurement, and monitoring solutions for medical, nuclear energy, defense, and scientific research applications.
Why Are We Bullish on MIR?
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Market share has increased this cycle as its 11.8% annual revenue growth over the last five years was exceptional
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Operating margin improvement of 6.2 percentage points over the last five years demonstrates its ability to scale efficiently
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Incremental sales over the last two years have been highly profitable as its earnings per share increased by 29.1% annually, topping its revenue gains