Stability is great, but low-volatility stocks may struggle to deliver market-beating returns over time as they sometimes underperform during bull markets.
Finding the right balance between safety and returns isn’t easy, which is why StockStory is here to help. Keeping that in mind, here is one low-volatility stock providing safe-and-steady growth and two stuck in limbo.
Two Stocks to Sell:
Amtech (ASYS)
Rolling One-Year Beta: 0.54
Focusing on the silicon carbide and power semiconductor sectors, Amtech Systems (NASDAQ:ASYS) produces the machinery and related chemicals needed for manufacturing semiconductors.
Why Is ASYS Risky?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 7.9% annually over the last two years
- Suboptimal cost structure is highlighted by its history of operating margin losses
- Push for growth has led to negative returns on capital, signaling value destruction, and its falling returns suggest its earlier profit pools are drying up
Amtech’s stock price of $4.59 implies a valuation ratio of 17.8x forward EV-to-EBITDA. Check out our free in-depth research report to learn more about why ASYS doesn’t pass our bar.
Universal Technical Institute (UTI)
Rolling One-Year Beta: 0.92
Founded in 1965, Universal Technical Institute (NYSE: UTI) is a leading provider of technical training programs, specializing in automotive, diesel, collision repair, motorcycle, and marine technicians.
Why Does UTI Worry Us?
- Operating margin of 7.8% falls short of the industry average, and the smaller profit dollars make it harder to react to unexpected market developments
- Capital intensity will likely increase as its free cash flow margin is anticipated to drop by 1.6 percentage points over the next year
- Underwhelming 9.2% return on capital reflects management’s difficulties in finding profitable growth opportunities
At $31.58 per share, Universal Technical Institute trades at 14.5x forward EV-to-EBITDA. Read our free research report to see why you should think twice about including UTI in your portfolio.
One Stock to Watch:
Watts Water Technologies (WTS)
Rolling One-Year Beta: 0.87
Founded in 1874, Watts Water (NYSE:WTS) specializes in manufacturing water products and systems for residential, commercial, and industrial applications globally.
Why Is WTS Interesting?
- Superior product capabilities and pricing power lead to a stellar gross margin of 45%
- Operating margin improvement of 4.5 percentage points over the last five years demonstrates its ability to scale efficiently
- Share repurchases have amplified shareholder returns as its annual earnings per share growth of 16.6% exceeded its revenue gains over the last five years
Watts Water Technologies is trading at $262.32 per share, or 28.3x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
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