A highly volatile stock can deliver big gains - or just as easily wipe out a portfolio if things go south. While some investors embrace risk, mistakes can be costly for those who aren’t prepared.
These stocks can be a rollercoaster, and StockStory is here to guide you through the ups and downs. That said, here is one volatile stock that could reward patient investors and two best left to the gamblers.
Two Stocks to Sell:
Elastic (ESTC)
Rolling One-Year Beta: 1.60
Started by Shay Banon as a search engine for his wife's growing list of recipes at Le Cordon Bleu cooking school in Paris, Elastic (NYSE: ESTC) helps companies integrate search into their products and monitor their cloud infrastructure.
Why Do We Think Twice About ESTC?
- Annual revenue growth of 19.8% over the last three years was below our standards for the software sector
- Historical operating margin losses point to an inefficient cost structure
- Free cash flow margin is forecasted to shrink by 1.7 percentage points in the coming year, suggesting the company will consume more capital to keep up with its competitors
Elastic’s stock price of $90 implies a valuation ratio of 5.7x forward price-to-sales. If you’re considering ESTC for your portfolio, see our FREE research report to learn more.
Appian (APPN)
Rolling One-Year Beta: 1.41
Founded by Matt Calkins and his three friends out of an apartment in Northern Virginia, Appian (NASDAQ: APPN) sells a software platform that lets its users build applications without using much code, allowing them to create new software more quickly.
Why Is APPN Not Exciting?
- Revenue increased by 17.1% annually over the last three years, acceptable on an absolute basis but tepid for a software company enjoying secular tailwinds
- Long payback periods on sales and marketing expenses limit customer growth and signal the company operates in a highly competitive environment
- Low free cash flow margin of 4.8% for the last year gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
Appian is trading at $29.59 per share, or 3.1x forward price-to-sales. Read our free research report to see why you should think twice about including APPN in your portfolio.
One Stock to Buy:
Duolingo (DUOL)
Rolling One-Year Beta: 1.83
Founded by a Carnegie Mellon computer science professor and his Ph.D. student, Duolingo (NASDAQ: DUOL) is a mobile app helping people learn new languages.
Why Should You Buy DUOL?
- Monthly Active Users are rising, meaning the company can increase revenue without incurring additional customer acquisition costs if it can cross-sell additional products and features
- Incremental sales over the last three years have been highly profitable as its earnings per share increased by 178% annually, topping its revenue gains
- Impressive free cash flow profitability enables the company to fund new investments or reward investors with share buybacks/dividends, and its recently improved profitability means it has even more resources to invest or distribute
At $366.60 per share, Duolingo trades at 58.9x forward EV/EBITDA. Is now a good time to buy? See for yourself in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
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