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 avoid and some better opportunities instead.
Greenbrier (GBX)
Rolling One-Year Beta: -0.15
Having designed the industry’s first double-decker railcar in the 1980s, Greenbrier (NYSE: GBX) supplies the freight rail transportation industry with railcars and related services.
Why Do We Steer Clear of GBX?
- Declining unit sales over the past two years show it’s struggled to increase its sales volumes and had to rely on price increases
- Cash-burning tendencies make us wonder if it can sustainably generate shareholder value
- 7× net-debt-to-EBITDA ratio shows it’s overleveraged and increases the probability of shareholder dilution if things turn unexpectedly
Greenbrier is trading at $41.95 per share, or 12.1x forward P/E. To fully understand why you should be careful with GBX, check out our full research report (it’s free).
Employers Holdings (EIG)
Rolling One-Year Beta: 0.01
With roots in Nevada and a strong concentration in California where 45% of its premiums are generated, Employers Holdings (NYSE: EIG) is a specialty provider of workers' compensation insurance focused on small and select businesses engaged in low-to-medium hazard industries across the United States.
Why Do We Think EIG Will Underperform?
- Net premiums earned plateaued over the last two years, signaling weak incremental demand for its insurance policies
- Day-to-day expenses have swelled relative to revenue over the last five years as its pre-tax profit margin fell by 24.5 percentage points
- Earnings per share fell by 22.7% annually over the last five years while its revenue grew, showing its incremental sales were much less profitable
Employers Holdings’s stock price of $48.48 implies a valuation ratio of 1x forward P/B. Read our free research report to see why you should think twice about including EIG in your portfolio.
WSFS Financial (WSFS)
Rolling One-Year Beta: 0.23
Founded in 1832 as Wilmington Savings Fund Society and one of the oldest banks in America still operating under its original name, WSFS Financial (NASDAQ: WSFS) operates a community banking and wealth management franchise primarily serving customers in the Mid-Atlantic region through its main subsidiary, WSFS Bank.
Why Do We Think Twice About WSFS?
- Annual revenue growth of 4.1% over the last two years was below our standards for the banking sector
- Estimated net interest income growth of 5.3% for the next 12 months implies demand will slow from its five-year trend
- Performance over the past five years shows its incremental sales were less profitable, as its 2.1% annual earnings per share growth trailed its revenue gains
At $77.82 per share, WSFS Financial trades at 1.4x forward P/B. If you’re considering WSFS for your portfolio, see our FREE research report to learn more.
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