Expensive stocks typically earn their valuations through superior growth rates that other companies simply can’t match. The flip side though is that these lofty expectations make them particularly susceptible to drawdowns when market sentiment shifts.
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. That said, here is one high-flying stock expanding its competitive advantage and two facing an uphill battle.
Two High-Flying Stocks to Sell:
Starbucks (SBUX)
Forward P/E Ratio: 38.6x
Started by three friends in Seattle’s historic Pike Place Market, Starbucks (NASDAQ: SBUX) is a globally-renowned coffeehouse chain that offers a wide selection of high-quality coffee, beverages, and food items.
Why Are We Wary of SBUX?
- Lagging same-store sales over the past two years suggest it might have to change its pricing and marketing strategy to stimulate demand
- Projected sales decline of 2.6% for the next 12 months points to a tough demand environment ahead
- Day-to-day expenses have swelled relative to revenue over the last year as its operating margin fell by 4.9 percentage points
At $103.66 per share, Starbucks trades at 38.6x forward P/E. Check out our free in-depth research report to learn more about why SBUX doesn’t pass our bar.
Werner (WERN)
Forward P/E Ratio: 36.7x
Conducting business in over a 100 countries, Werner (NASDAQ: WERN) offers full-truckload, less-than-truckload, and intermodal delivery services.
Why Do We Think WERN Will Underperform?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 2.3% annually over the last two years
- Earnings per share fell by 44.6% annually over the last five years while its revenue grew, showing its incremental sales were much less profitable
- Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results
Werner is trading at $43.74 per share, or 36.7x forward P/E. Read our free research report to see why you should think twice about including WERN in your portfolio.
One High-Flying Stock to Watch:
Western Digital (WDC)
Forward P/E Ratio: 37.4x
Founded in 1970 by a Motorola employee, Western Digital (NASDAQ: WDC) is a leading producer of hard disk drives, SSDs and flash memory.
Why Are We Positive on WDC?
- Sales outlook for the upcoming 12 months calls for 41.7% growth, an acceleration from its two-year trend
- Operating margin increased by 17.3 percentage points over the last five years as it refined its cost structure
- Free cash flow margin expanded by 17.1 percentage points over the last five years, providing additional flexibility for investments and share buybacks/dividends
Western Digital’s stock price of $650.00 implies a valuation ratio of 37.4x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
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-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today.
