Volatility cuts both ways - while it creates opportunities, it also increases risk, making sharp declines just as likely as big gains. This unpredictability can shake out even the most experienced investors.
Navigating these stocks isn’t easy, which is why StockStory helps you find Comfort In Chaos. Keeping that in mind, here are three volatile stocks to steer clear of and a few better alternatives.
iHeartMedia (IHRT)
Rolling One-Year Beta: 1.14
Occasionally featuring celebrity hosts like Ryan Seacrest on its shows, iHeartMedia (NASDAQ: IHRT) is a leading multimedia company renowned for its extensive network of radio stations, digital platforms, and live events across the globe.
Why Do We Pass on IHRT?
- 4.2% annual revenue growth over the last five years was slower than its consumer discretionary peers
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of -0.1% for the last two years
- 8× net-debt-to-EBITDA ratio makes lenders less willing to extend additional capital, potentially necessitating dilutive equity offerings
At $2.02 per share, iHeartMedia trades at 7.4x forward EV-to-EBITDA. Check out our free in-depth research report to learn more about why IHRT doesn’t pass our bar.
Deckers (DECK)
Rolling One-Year Beta: 1.13
Established in 1973, Deckers (NYSE: DECK) is a footwear and apparel conglomerate with a portfolio of lifestyle and performance brands.
Why Is DECK Risky?
- Constant currency revenue growth has disappointed over the past two years and shows demand was soft
- Subpar operating margin of 23.2% constrains its ability to invest in process improvements or effectively respond to new competitive threats
- Low free cash flow margin of 18.8% for the last two years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
Deckers’s stock price of $80.18 implies a valuation ratio of 10.7x forward P/E. To fully understand why you should be careful with DECK, check out our full research report (it’s free).
ADT (ADT)
Rolling One-Year Beta: 1.09
Founded in 1874 and headquartered in Boca Raton, Florida, ADT (NYSE: ADT) is a provider of security, automation, and smart home solutions, offering comprehensive services for home and business protection.
Why Do We Avoid ADT?
- Flat sales over the last five years suggest it must innovate and find new ways to grow
- Projected 4.6 percentage point decline in its free cash flow margin next year reflects the company’s plans to increase its investments to defend its market position
- ROIC of 8% reflects management’s challenges in identifying attractive investment opportunities
ADT is trading at $6.33 per share, or 6.7x forward P/E. If you’re considering ADT for your portfolio, see our FREE research report to learn more.
Stocks We Like More
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