Stability is great, but low-volatility stocks may struggle to deliver market-beating returns over time as they sometimes underperform during bull markets.
Finding the right balance between safety and returns isn’t easy, which is why StockStory is here to help. That said, here are three low-volatility stocks to avoid and some better opportunities instead.
Mayville Engineering (MEC)
Rolling One-Year Beta: 0.38
Originally founded solely on tool and die manufacturing, Mayville Engineering Company (NYSE: MEC) specializes in metal fabrication, tube bending, and welding to be used in various industries.
Why Should You Sell MEC?
- Sales trends were unexciting over the last five years as its 2.3% annual growth was below the typical industrials company
- Gross margin of 12.5% is below its competitors, leaving less money to invest in areas like marketing and R&D
- Issuance of new shares over the last five years caused its earnings per share to fall by 11.2% annually while its revenue grew
At $11.96 per share, Mayville Engineering trades at 4.3x forward EV-to-EBITDA. If you’re considering MEC for your portfolio, see our FREE research report to learn more.
EnerSys (ENS)
Rolling One-Year Beta: 0.78
Supplying batteries that power equipment as big as mining rigs, EnerSys (NYSE: ENS) manufactures various kinds of batteries for a range of industries.
Why Are We Cautious About ENS?
- Declining unit sales over the past two years show it’s struggled to increase its sales volumes and had to rely on price increases
- Competitive supply chain dynamics and steep production costs are reflected in its low gross margin of 25.3%
- Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 4.6 percentage points
EnerSys is trading at $86.84 per share, or 9.1x forward price-to-earnings. To fully understand why you should be careful with ENS, check out our full research report (it’s free).
West Pharmaceutical Services (WST)
Rolling One-Year Beta: 0.43
Founded in 1923 and serving as a critical link in the pharmaceutical supply chain, West Pharmaceutical Services (NYSE: WST) manufactures specialized packaging, containment systems, and delivery devices for injectable drugs and healthcare products.
Why Does WST Give Us Pause?
- Products and services are facing end-market challenges during this cycle, as seen in its flat sales over the last two years
- Expenses have increased as a percentage of revenue over the last two years as its adjusted operating margin fell by 5.7 percentage points
- Eroding returns on capital suggest its historical profit centers are aging
West Pharmaceutical Services’s stock price of $215.34 implies a valuation ratio of 33.5x forward price-to-earnings. Dive into our free research report to see why there are better opportunities than WST.
Stocks We Like More
Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.
While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like 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 175% over the last five years.
Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Sterling Infrastructure (+1,096% five-year return). Find your next big winner with StockStory today for free.
