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.
These stocks can be a rollercoaster, and StockStory is here to guide you through the ups and downs. That said, here are three volatile stocks to steer clear of and a few better alternatives.
Custom Truck One Source (CTOS)
Rolling One-Year Beta: 1.66
Inspired by a family gas station, Custom Truck One Source (NYSE: CTOS) is a distributor of trucks and heavy equipment.
Why Do We Avoid CTOS?
- 4.6% annual revenue growth over the last two years was slower than its industrials peers
- Free cash flow margin shrank by 29.2 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
- Short cash runway increases the probability of a capital raise that dilutes existing shareholders
At $4.31 per share, Custom Truck One Source trades at 58.6x forward P/E. Read our free research report to see why you should think twice about including CTOS in your portfolio.
ESAB (ESAB)
Rolling One-Year Beta: 1.18
Having played a significant role in the construction of the iconic Sydney Opera House, ESAB (NYSE: ESAB) manufactures and sells welding and cutting equipment for numerous industries.
Why Is ESAB Not Exciting?
- Organic revenue growth fell short of our benchmarks over the past two years and implies it may need to improve its products, pricing, or go-to-market strategy
- Projected sales growth of 2.9% for the next 12 months suggests sluggish demand
- Earnings per share lagged its peers over the last three years as they only grew by 4.4% annually
ESAB is trading at $123.22 per share, or 22.9x forward P/E. If you’re considering ESAB for your portfolio, see our FREE research report to learn more.
Alight (ALIT)
Rolling One-Year Beta: 1.12
Born from a corporate spinoff in 2017 to focus on employee experience technology, Alight (NYSE: ALIT) provides human capital management solutions that help companies administer employee benefits, payroll, and workforce management systems.
Why Do We Think ALIT Will Underperform?
- Annual sales declines of 1.9% for the past five years show its products and services struggled to connect with the market during this cycle
- Earnings per share have contracted by 3.5% annually over the last two years, a headwind for returns as stock prices often echo long-term EPS performance
- Low returns on capital reflect management’s struggle to allocate funds effectively, and its shrinking returns suggest its past profit sources are losing steam
Alight’s stock price of $5.39 implies a valuation ratio of 8.5x forward P/E. Check out our free in-depth research report to learn more about why ALIT doesn’t pass our bar.
Stocks We Like More
Market indices reached historic highs following Donald Trump’s presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth.
While this has caused many investors to adopt a "fearful" wait-and-see approach, we’re leaning into our best ideas that can grow regardless of the political or macroeconomic climate. Take advantage of Mr. Market by checking out our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today for free.
