3 Low-Volatility Stocks in Hot Water

A stock with low volatility can be reassuring, but it doesn’t always mean strong long-term performance. Investors who prioritize stability may miss out on higher-reward opportunities elsewhere.

Finding the right balance between safety and returns isn’t easy, which is why StockStory is here to help. Keeping that in mind, here are three low-volatility stocks to avoid and some better opportunities instead.

Churchill Downs (CHDN)

Rolling One-Year Beta: 0.49

Famous for hosting the Kentucky Derby, Churchill Downs (NASDAQ:CHDN) operates a horse racing, online wagering, and gaming entertainment business in the United States.

Why Are We Wary of CHDN?

1. Estimated sales growth of 4.8% for the next 12 months implies demand will slow from its two-year trend

2. Poor free cash flow margin of 4.5% for the last two years limits its freedom to invest in growth initiatives, execute share buybacks, or pay dividends

3. ROIC of 7.8% reflects management’s challenges in identifying attractive investment opportunities

Churchill Downs’s stock price of $100.95 implies a valuation ratio of 15.5x forward P/E. Dive into our free research report to see why there are better opportunities than CHDN.

Malibu Boats (MBUU)

Rolling One-Year Beta: 0.54

Founded in California in 1982, Malibu Boats (NASDAQ:MBUU) is a manufacturer of high-performance sports boats and luxury watercrafts.

Why Should You Sell MBUU?

1. Number of boats sold has disappointed over the past two years, indicating weak demand for its offerings

2. Earnings per share fell by 28.9% annually over the last five years while its revenue was flat, showing each sale was less profitable

3. Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned

Malibu Boats is trading at $31.85 per share, or 10.8x forward P/E. Read our free research report to see why you should think twice about including MBUU in your portfolio, it’s free.

Iridium (IRDM)

Rolling One-Year Beta: 0.78

With a constellation of 66 low-earth orbit satellites providing coverage to every inch of the planet, Iridium Communications (NASDAQ:IRDM) operates a global satellite network that provides voice and data services to customers in remote areas where traditional telecommunications are unavailable.

Why Does IRDM Give Us Pause?

1. Revenue base of $841.7 million puts it at a disadvantage compared to larger competitors exhibiting economies of scale

2. Free cash flow margin shrank by 3.2 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive

3. Below-average returns on capital indicate management struggled to find compelling investment opportunities

At $30.14 per share, Iridium trades at 20.4x forward P/E. To fully understand why you should be careful with IRDM, check out our full research report (it’s free).

High-Quality Stocks for All Market Conditions

The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.

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