Stability is great, but low-volatility stocks may struggle to deliver market-beating returns over time as they sometimes underperform during bull markets.
Luckily for you, StockStory helps you navigate which companies are truly worth holding. That said, here are three low-volatility stocks to steer clear of and a few better alternatives.
Wiley (WLY)
Rolling One-Year Beta: 0.40
With roots dating back to 1807 when Charles Wiley opened a small printing shop in Manhattan, John Wiley & Sons (NYSE: WLY) is a global academic publisher that provides scientific journals, books, digital courseware, and knowledge solutions for researchers, students, and professionals.
Why Is WLY Risky?
- Sales tumbled by 2.2% annually over the last five years, showing market trends are working against its favor during this cycle
- Estimated sales for the next 12 months are flat and imply a softer demand environment
- Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 4.3 percentage points
At $31.50 per share, Wiley trades at 1x trailing 12-month price-to-sales. To fully understand why you should be careful with WLY, check out our full research report (it’s free).
Waste Connections (WCN)
Rolling One-Year Beta: 0.20
Operating a network of municipal solid waste landfills in the U.S. and Canada, Waste Connections (NYSE: WCN) is North America's third-largest waste management company providing collection, disposal, and recycling services.
Why Do We Think Twice About WCN?
- Absence of organic revenue growth over the past two years suggests it may have to lean into acquisitions to drive its expansion
- Expenses have increased as a percentage of revenue over the last five years as its operating margin fell by 5 percentage points
- Below-average returns on capital indicate management struggled to find compelling investment opportunities, and its falling returns suggest its earlier profit pools are drying up
Waste Connections is trading at $166.57 per share, or 30x forward P/E. Check out our free in-depth research report to learn more about why WCN doesn’t pass our bar.
Selective Insurance Group (SIGI)
Rolling One-Year Beta: 0.17
Founded in 1926 during the early days of automobile insurance, Selective Insurance Group (NASDAQ: SIGI) is a property and casualty insurance company that sells commercial, personal, and excess and surplus lines insurance products through independent agents.
Why Is SIGI Not Exciting?
- Costs have risen faster than its revenue over the last five years, causing its combined ratio to worsen by 2.3 percentage points
- Incremental sales over the last two years were less profitable as its 9.2% annual earnings per share growth lagged its revenue gains
- Annual book value per share growth of 6.4% over the last five years was below our standards for the insurance sector
Selective Insurance Group’s stock price of $82.82 implies a valuation ratio of 1.5x forward P/B. Dive into our free research report to see why there are better opportunities than SIGI.
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