Expensive stocks often command premium valuations because the market thinks their business models are exceptional. However, the downside is that high expectations are already baked into their prices, leaving little room for error if they stumble even slightly.

Finding the right balance between price and quality can challenge even the most skilled investors. Luckily for you, we started StockStory to help you identify the real opportunities. That said, here is one high-flying stock to hold for the long term and two with big downside risk.

Two High-Flying Stocks to Sell:

Transcat (TRNS)

Forward P/E Ratio: 37.5x

Serving the pharmaceutical, industrial manufacturing, energy, and chemical process industries, Transcat (NASDAQ: TRNS) provides measurement instruments and supplies.

Why Are We Hesitant About TRNS?

1. Costs have risen faster than its revenue over the last five years, causing its operating margin to decline by 2.8 percentage points
2. Earnings per share fell by 6.8% annually over the last two years while its revenue grew, partly because it diluted shareholders
3. Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value

At $76.07 per share, Transcat trades at 37.5x forward P/E. Dive into our free research report to see why there are better opportunities than TRNS.

SolarEdge (SEDG)

Forward P/E Ratio: 796.8x

Established in 2006, SolarEdge (NASDAQ: SEDG) creates advanced systems to improve the efficiency of solar panels.

Why Do We Think SEDG Will Underperform?

1. Products and services are facing significant end-market challenges during this cycle as sales have declined by 4.1% annually over the last five years
2. Cash burn makes us question whether it can achieve sustainable long-term growth
3. Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions

SolarEdge is trading at $48.65 per share, or 796.8x forward P/E. To fully understand why you should be careful with SEDG, check out our full research report (it’s free).

One High-Flying Stock to Buy:

Woodward (WWD)

Forward P/E Ratio: 42.2x

Initially designing controls for water wheels in the early 1900s, Woodward (NASDAQ: WWD) designs, services, and manufactures energy control products and optimization solutions.

Why Is WWD a Good Business?

1. Market share has increased this cycle as its 10.9% annual revenue growth over the last two years was exceptional
2. Operating margin improvement of 4.3 percentage points over the last five years demonstrates its ability to scale efficiently
3. Earnings per share have massively outperformed its peers over the last two years, increasing by 29.4% annually

Woodward’s stock price of $371.82 implies a valuation ratio of 42.2x forward P/E. Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.

High-Quality Stocks for All Market Conditions

WHILE YOU’RE HERE: Top 9 Market-Beating Stocks. The best stocks don't just beat the market once. They do it again. And again. Robust revenue growth, rising free cash flow, returns on capital that leave their competition in the dust. The market has already rewarded these businesses.

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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.