Market swings can be tough to stomach, and volatile stocks often experience exaggerated moves in both directions. While many thrive during risk-on environments, many also struggle to maintain investor confidence when the ride gets bumpy.
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 that may be too risky for most investors and some better opportunities instead.
Palo Alto Networks (PANW)
Rolling One-Year Beta: 1.46
Founded in 2005 by security visionary Nir Zuk who sought to reimagine firewall technology, Palo Alto Networks (NASDAQ: PANW) provides AI-powered cybersecurity platforms that protect organizations' networks, clouds, and endpoints from sophisticated threats.
Why Are We Wary of PANW?
- Steep infrastructure costs and weaker unit economics for a software company are reflected in its low gross margin of 70.4%
- Long payback periods on sales and marketing expenses limit customer growth and signal the company operates in a highly competitive environment
- Efficiency fell over the last year as its operating margin declined by 7.4 percentage points because it pursued growth instead of profits
Palo Alto Networks is trading at $395.98 per share, or 22.9x forward price-to-sales. Dive into our free research report to see why there are better opportunities than PANW.
Methode Electronics (MEI)
Rolling One-Year Beta: 2.09
Founded in 1946, Methode Electronics (NYSE: MEI) is a global supplier of custom-engineered solutions for Original Equipment Manufacturers (OEMs).
Why Are We Out on MEI?
- Sales tumbled by 2.5% annually over the last five years, showing market trends are working against it during this cycle
- Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 7.3 percentage points
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
Methode Electronics’s stock price of $13.86 implies a valuation ratio of 8.6x forward EV-to-EBITDA. Read our free research report to see why you should think twice about including MEI in your portfolio.
Cognex (CGNX)
Rolling One-Year Beta: 1.30
Founded in 1981 when computer vision was in its infancy, Cognex (NASDAQ: CGNX) develops machine vision systems and software that help manufacturers and logistics companies automate quality inspection and tracking of products.
Why Is CGNX Not Exciting?
- Sales trends were unexciting over the last five years as its 2.1% annual growth was below the typical business services company
- Falling earnings per share over the last five years has some investors worried as stock prices ultimately follow EPS over the long term
- Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability
At $61.78 per share, Cognex trades at 32.6x forward P/E. To fully understand why you should be careful with CGNX, check out our full research report (it’s free).
Stocks We Like 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.
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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+271% between June 2020 and June 2025). Find your next big winner with StockStory today.
