Expensive stocks typically earn their valuations through superior growth rates that other companies simply can’t match. The flip side though is that these lofty expectations make them particularly susceptible to drawdowns when market sentiment shifts.
Determining whether a company’s quality justifies its price causes headaches for nearly all investors, which is why we started StockStory - to help you separate the real opportunities from the speculative ones. That said, here is one high-flying stock with strong fundamentals and two with big downside risk.
Two High-Flying Stocks to Sell:
Marcus & Millichap (MMI)
Forward P/E Ratio: 62.8x
Founded in 1971, Marcus & Millichap (NYSE: MMI) specializes in commercial real estate investment sales, financing, research, and advisory services.
Why Do We Steer Clear of MMI?
- Annual revenue growth of 1.9% over the last five years was below our standards for the consumer discretionary sector
- Poor free cash flow margin of 6.4% for the last two years limits its freedom to invest in growth initiatives, execute share buybacks, or pay dividends
- Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
At $29.97 per share, Marcus & Millichap trades at 62.8x forward P/E. Dive into our free research report to see why there are better opportunities than MMI.
American Outdoor Brands (AOUT)
Forward P/E Ratio: 39.7x
Spun off from Smith and Wesson in 2020, American Outdoor Brands (NASDAQ: AOUT) is an outdoor and recreational products company that offers outdoor and shooting sports products but does not sell firearms themselves.
Why Do We Pass on AOUT?
- Products and services have few die-hard fans as sales have declined by 4.3% annually over the last five years
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 1.3% for the last two years
- Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results
American Outdoor Brands is trading at $10.21 per share, or 39.7x forward P/E. Read our free research report to see why you should think twice about including AOUT in your portfolio.
One High-Flying Stock to Buy:
Howmet (HWM)
Forward P/E Ratio: 50.2x
Inventing the first forged aluminum truck wheel, Howmet (NYSE: HWM) specializes in lightweight metals engineering and manufacturing multi-material components used in vehicles.
Why Are We Backing HWM?
- Annual revenue growth of 12.3% over the last five years was superb and indicates its market share increased during this cycle
- Performance over the past two years was turbocharged by share buybacks, which enabled its earnings per share to grow faster than its revenue
- Free cash flow margin increased by 13.2 percentage points over the last five years, giving the company more capital to invest or return to shareholders
Howmet’s stock price of $270.91 implies a valuation ratio of 50.2x forward P/E. Is now the right time to buy? See for yourself in our comprehensive research report, it’s free.
Stocks We Like Even More
ALSO WORTH WATCHING: Top 5 Momentum Stocks. The best time to own a great stock is when the market is finally noticing it. These aren’t just high-quality businesses. Something is happening with them right now. Elite fundamentals meet near-term momentum — both boxes checked at the same time.
Find out which stocks our AI platform is flagging this week. See this week’s Strong Momentum stocks — FREE. Get Our Strong Momentum Stocks for Free HERE.
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.
