A stock with low volatility can be reassuring, but it doesn’t always mean strong long-term performance. Investors who prioritize stability may miss out on higher-reward opportunities elsewhere.
Luckily for you, StockStory helps you navigate which companies are truly worth holding. Keeping that in mind, here are three low-volatility stocks to avoid and some better opportunities instead.
Regeneron (REGN)
Rolling One-Year Beta: 0.69
Founded by scientists who wanted to build a company where science could thrive, Regeneron Pharmaceuticals (NASDAQ: REGN) develops and commercializes medicines for serious diseases, with key products treating eye conditions, allergic diseases, cancer, and other disorders.
Why Are We Wary of REGN?
- Sizable revenue base leads to growth challenges as its 6.7% annual revenue increases over the last two years fell short of other healthcare companies
- Day-to-day expenses have swelled relative to revenue over the last five years as its adjusted operating margin fell by 12.3 percentage points
- Eroding returns on capital suggest its historical profit centers are aging
At $570.81 per share, Regeneron trades at 14.3x forward P/E. Check out our free in-depth research report to learn more about why REGN doesn’t pass our bar.
PacBio (PACB)
Rolling One-Year Beta: 0.40
Pioneering what scientists call "HiFi long-read sequencing," recognized as Nature Methods' method of the year for 2022, Pacific Biosciences (NASDAQ: PACB) develops advanced DNA sequencing systems that enable scientists and researchers to analyze genomes with unprecedented accuracy and completeness.
Why Do We Think PACB Will Underperform?
- 6.6% annual revenue growth over the last two years was slower than its healthcare peers
- Free cash flow margin dropped by 29.9 percentage points over the last five years, implying the company became more capital intensive as competition picked up
- Short cash runway increases the probability of a capital raise that dilutes existing shareholders
PacBio is trading at $1.65 per share, or 3.1x forward price-to-sales. Read our free research report to see why you should think twice about including PACB in your portfolio.
Bank of Hawaii (BOH)
Rolling One-Year Beta: 0.64
Founded in 1897 as a financial anchor for the newly annexed Hawaiian territory, Bank of Hawaii (NYSE: BOH) is a financial institution providing banking, investment, and insurance services primarily to customers in Hawaii, Guam, and other Pacific Islands.
Why Are We Cautious About BOH?
- Net interest income was flat over the last four years, indicating it’s failed to expand this cycle
- Inferior net interest margin of 2.2% means it must compensate for lower profitability through increased loan originations
- Sales over the last five years were less profitable as its earnings per share fell by 5.6% annually while its revenue was flat
Bank of Hawaii’s stock price of $67.43 implies a valuation ratio of 1.8x forward P/B. If you’re considering BOH for your portfolio, see our FREE research report to learn more.
Stocks We Like More
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