"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 are three high-flying stocks with big downside risk and some other investments you should consider instead.
Himax (HIMX)
Forward P/E Ratio: 29.7x
Taiwan-based Himax Technologies (NASDAQ: HIMX) is a leading manufacturer of display driver chips and timing controllers used in TVs, laptops, and mobile phones.
Why Should You Dump HIMX?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 4.2% annually over the last five years
- Earnings per share decreased by more than its revenue over the last five years, showing each sale was less profitable
- High net-debt-to-EBITDA ratio of 8× could force the company to raise capital at unfavorable terms if market conditions deteriorate
Himax is trading at $18.41 per share, or 29.7x forward P/E. Check out our free in-depth research report to learn more about why HIMX doesn’t pass our bar.
Walmart (WMT)
Forward P/E Ratio: 44.8x
Known for its large-format Supercenters, Walmart (NASDAQ: WMT) is a retail pioneer that serves a budget-conscious consumer who is looking for a wide range of products under one roof.
Why Are We Cautious About WMT?
- Scale is a double-edged sword because it limits the company’s growth potential compared to its smaller competitors, as reflected in its below-average annual revenue increases of 5.3% for the last three years
- Commoditized inventory, bad unit economics, and high competition are reflected in its low gross margin of 24.9%
- Subpar operating margin of 4.3% constrains its ability to invest in process improvements or effectively respond to new competitive threats
At $130.43 per share, Walmart trades at 44.8x forward P/E. To fully understand why you should be careful with WMT, check out our full research report (it’s free).
Corcept (CORT)
Forward P/E Ratio: 79.4x
Focusing on the powerful stress hormone that affects everything from metabolism to immune function, Corcept Therapeutics (NASDAQ: CORT) develops and markets medications that modulate cortisol to treat endocrine disorders, cancer, and neurological diseases.
Why Is CORT Not Exciting?
- Incremental sales over the last five years were much less profitable as its earnings per share fell by 19.4% annually while its revenue grew
- Free cash flow margin dropped by 31 percentage points over the last five years, implying the company became more capital intensive as competition picked up
- Eroding returns on capital suggest its historical profit centers are aging
Corcept’s stock price of $51.50 implies a valuation ratio of 79.4x forward P/E. Check out our free in-depth research report to learn more about why CORT doesn’t pass our bar.
High-Quality Stocks for All Market Conditions
ONE MORE THING: Top 6 Stocks for This Week. This market is separating quality stocks from expensive ones fast. AI taking down whole sectors with no warning. In a rotation this fast, you need more than a list of good companies.
Our AI system flagged Palantir before it ran 1,662%. AppLovin before it ran 753%. Nvidia before it ran 1,178%. Each week it produces 6 new names that pass the same tests. Get Our Top 6 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.
