“You get what you pay for” often applies to expensive stocks with best-in-class business models and execution. While their quality can sometimes justify the premium, they typically experience elevated volatility during market downturns when expectations change.
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. Keeping that in mind, here is one high-flying stock with strong fundamentals and two with big downside risk.
Two high-flying stocks to sell:
Shake Shack (SHAK)
Forward P/E ratio: 52.8x
Started as a hot dog cart in New York City's Madison Square Park, Shake Shack (NYSE: SHAK) is a fast-food restaurant known for its burgers and milkshakes.
Why Does SHAK Give Us Pause?
- Operating margin of 2.5% falls short of the industry average, and the smaller profit dollars make it harder to react to unexpected market developments
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 1.2% for the last two years
- ROIC of 0.1% reflects management’s challenges in identifying attractive investment opportunities
At $70.44 per share, Shake Shack trades at 52.8x forward P/E. Check out our free in-depth research report to learn more about why SHAK doesn’t pass our bar.
Surgery Partners (SGRY)
Forward P/E ratio: 97x
With more than 180 locations across 33 states serving as alternatives to traditional hospital settings, Surgery Partners (NASDAQ: SGRY) operates a national network of outpatient surgical facilities including ambulatory surgery centers and short-stay surgical hospitals.
Why Does SGRY Worry Us?
- Disappointing unit sales over the past two years imply it may need to invest in improvements to get back on track
- Forecasted revenue decline of 14.3% for the upcoming 12 months implies demand will fall off a cliff
- 7× net-debt-to-EBITDA ratio makes lenders less willing to extend additional capital, potentially necessitating dilutive equity offerings
Surgery Partners is trading at $23.22 per share, or 97x forward P/E. If you’re considering SGRY for your portfolio, see our FREE research report to learn more.
One high-flying stock to buy:
Rocket Lab (RKLB)
Forward P/E ratio: 3,430.9x
Becoming the first private company in the Southern Hemisphere to reach space, Rocket Lab (NASDAQ: RKLB) offers rockets designed for launching small satellites.
Why Do We Love RKLB?
- Annual revenue growth of 53.4% over the past two years was outstanding, reflecting market share gains this cycle
- Negative free cash flow margin has improved over the last five years, showing the company is one step closer to financial self-sufficiency
- Historical investments are beginning to pay off as its returns on capital are growing
Rocket Lab’s stock price of $56.74 implies a valuation ratio of 3,430.9x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
High-quality stocks for all market conditions
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 (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+214% between June 2020 and June 2025). Find your next big winner with StockStory today.
