Market swings can be tough to stomach, and volatile stocks often experience exaggerated moves in both directions. While many thrive during risk-on environments, many also struggle to maintain investor confidence when the ride gets bumpy.
These stocks can be a rollercoaster, and StockStory is here to guide you through the ups and downs. Keeping that in mind, here are three volatile stocks to steer clear of and a few better alternatives.
Health Catalyst (HCAT)
Rolling one-year beta: 2.05
Built on its "Health Catalyst Flywheel" methodology that emphasizes measurable outcomes, Health Catalyst (NASDAQ: HCAT) provides data and analytics technology and services that help healthcare organizations manage their data and drive measurable clinical, financial, and operational improvements.
Why Do We Steer Clear of HCAT?
- Billings have dropped by 14.4% over the last year, suggesting it might have to lower prices to stimulate growth
- Gross margin of 51.2% reflects its high servicing costs
- Customer acquisition costs take a while to recoup, making it difficult to justify sales and marketing investments that could increase revenue
Health Catalyst’s stock price of $1.60 implies a valuation ratio of 0.6x forward price-to-sales. Read our free research report to see why you should think twice about including HCAT in your portfolio.
Sweetgreen (SG)
Rolling one-year beta: 2.08
Founded in 2007 by three Georgetown University alum, Sweetgreen (NYSE: SG) is a casual quick service chain known for its healthy salads and bowls.
Why Should You Sell SG?
- Poor same-store sales performance over the past two years indicates it’s having trouble bringing new diners into its restaurants
- Long-term business health is up for debate as its cash burn has increased over the last year
- Short cash runway increases the probability of a capital raise that dilutes existing shareholders
At $10.25 per share, Sweetgreen trades at 1.6x forward price-to-sales. Check out our free in-depth research report to learn more about why SG doesn’t pass our bar.
Energizer (ENR)
Rolling one-year beta: 1.38
Masterminds behind the viral Energizer Bunny mascot, Energizer (NYSE: ENR) is one of the world's largest manufacturers of batteries.
Why Do We Pass on ENR?
- Core business is underperforming as its organic revenue has disappointed over the past two years, suggesting it might need acquisitions to stimulate growth
- Demand will likely be weak over the next 12 months as Wall Street expects flat revenue
- High net-debt-to-EBITDA ratio of 5× increases the risk of forced asset sales or dilutive financing if operational performance weakens
Energizer is trading at $22.74 per share, or 6.8x forward P/E. If you’re considering ENR for your portfolio, see our FREE research report to learn more.
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