Expensive stocks often command premium valuations because the market thinks their business models are exceptional. However, the downside is that high expectations are already baked into their prices, leaving little room for error if they stumble even slightly.
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.
Krispy Kreme (DNUT)
Forward P/E Ratio: 344.4x
Famous for its Original Glazed doughnuts and parent company of Insomnia Cookies, Krispy Kreme (NASDAQ: DNUT) is one of the most beloved and well-known fast-food chains in the world.
Why Do We Think DNUT Will Underperform?
- Earnings per share have dipped by 23% annually over the past four years, which is concerning because stock prices follow EPS over the long term
- Cash-burning tendencies make us wonder if it can sustainably generate shareholder value
- High net-debt-to-EBITDA ratio of 8× could force the company to raise capital on unfavorable terms if market conditions deteriorate
Krispy Kreme’s stock price of $3.49 implies a valuation ratio of 344.4x forward P/E. If you’re considering DNUT for your portfolio, see our FREE research report to learn more.
Corcept (CORT)
Forward P/E Ratio: 73.6x
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 Does CORT Give Us Pause?
- Earnings per share fell by 19.4% annually over the last five years while its revenue grew, showing its incremental sales were much less profitable
- 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 is trading at $87.05 per share, or 73.6x forward P/E. Check out our free in-depth research report to learn more about why CORT doesn’t pass our bar.
Solaris Energy Infrastructure (SEI)
Forward P/E Ratio: 67.1x
After acquiring Mobile Energy Rentals in 2024 to enter the distributed power market, Solaris Energy Infrastructure (NYSE: SEI) leases mobile power equipment and provides logistics services for oil and gas well completion.
Why Do We Think Twice About SEI?
- Subscale operations are evident in its revenue base of $692.1 million, meaning it has fewer distribution channels than its larger rivals
- High extraction costs and unfavorable asset economics are reflected in its low gross margin of 40.6%
- Negative free cash flow raises questions about the return timeline for its investments
At $79.00 per share, Solaris Energy Infrastructure trades at 67.1x forward P/E. Read our free research report to see why you should think twice about including SEI in your portfolio.
High-Quality Stocks for All Market Conditions
WHILE YOU’RE HERE: Top 9 Market-Beating Stocks. The best stocks don’t just beat the market once. They do it again. And again. Robust revenue growth, rising free cash flow, returns on capital that leave their competition in the dust. The market has already rewarded these businesses.
But our AI platform says the party isn’t over. Find out which 9 stocks made the cut this week — FREE. Get Our Top 9 Market-Beating 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-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today.
