Low-volatility stocks may offer stability, but that often comes at the cost of slower growth and the upside potential of more dynamic companies.
Luckily for you, StockStory helps you navigate which companies are truly worth holding. Keeping that in mind, here are three low-volatility stocks to steer clear of and a few better alternatives.
Paycor (PYCR)
Rolling One-Year Beta: 0.63
Founded in 1990 in Cincinnati, Ohio, Paycor (NASDAQ: PYCR) provides software for small businesses to manage their payroll and HR needs in one place.
Why Does PYCR Worry Us?
- High servicing costs result in a relatively inferior gross margin of 66% that must be offset through increased usage
- Poor expense management has led to operating losses
- Forecasted free cash flow margin suggests the company will fail to improve its cash conversion over the next year
Paycor’s stock price of $22.49 implies a valuation ratio of 5.2x forward price-to-sales. Read our free research report to see why you should think twice about including PYCR in your portfolio.
Commercial Vehicle Group (CVGI)
Rolling One-Year Beta: 0.76
Formed from a partnership between two distinct companies, CVG (NASDAQ:CVGI) offers various components used in vehicles and systems used in warehouses.
Why Do We Think CVGI Will Underperform?
- Annual sales declines of 2.4% for the past five years show its products and services struggled to connect with the market during this cycle
- Free cash flow margin shrank by 9.1 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
- Limited cash reserves may force the company to seek unfavorable financing terms that could dilute shareholders
Commercial Vehicle Group is trading at $0.96 per share, or 10.5x forward price-to-earnings. If you’re considering CVGI for your portfolio, see our FREE research report to learn more.
Patterson Companies (PDCO)
Rolling One-Year Beta: 0.35
With roots dating back to 1877 and serving over 150,000 customers across North America and the UK, Patterson Companies (NASDAQ:PDCO) is a specialty distributor that supplies dental practices and animal health professionals with equipment, consumables, pharmaceuticals, and practice management software.
Why Are We Hesitant About PDCO?
- Organic sales performance over the past two years indicates the company may need to make strategic adjustments or rely on M&A to catalyze faster growth
- Estimated sales growth of 3.1% for the next 12 months is soft and implies weaker demand
- Cash burn makes us question whether it can achieve sustainable long-term growth
At $31.34 per share, Patterson Companies trades at 13.8x forward price-to-earnings. To fully understand why you should be careful with PDCO, check out our full research report (it’s free).
Stocks We Like More
The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.
While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio by checking out our Top 9 Market-Beating Stocks. 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 United Rentals (+322% five-year return). Find your next big winner with StockStory today for free.