Expensive stocks often command premium valuations because the market thinks their business models are exceptional. However, the downside is that high expectations are already baked into their prices, leaving little room for error if they stumble even slightly.
Finding the right balance between price and quality can challenge even the most skilled investors. Luckily for you, we started StockStory to help you identify the real opportunities. That said, here is one high-flying stock expanding its competitive advantage and two with big downside risk.
Two High-Flying Stocks to Sell:
Rockwell Automation (ROK)
Forward P/E Ratio: 31.1x
One of the first companies to address industrial automation, Rockwell Automation (NYSE: ROK) sells products that help customers extract more efficiency from their machinery.
Why Are We Cautious About ROK?
- Organic sales performance over the past two years indicates the company may need to make strategic adjustments or rely on M&A to catalyze faster growth
- Demand will likely be soft over the next 12 months as Wall Street’s estimates imply tepid growth of 4.8%
- Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability
Rockwell Automation’s stock price of $443.50 implies a valuation ratio of 31.1x forward P/E. To fully understand why you should be careful with ROK, check out our full research report (it’s free).
Leonardo DRS (DRS)
Forward P/E Ratio: 33.5x
Developing submarine detection systems for the U.S. Navy, Leonardo DRS (NASDAQ: DRS) is a provider of defense systems, electronics, and military support services.
Why Is DRS Not Exciting?
- Muted 5.6% annual revenue growth over the last five years shows its demand lagged behind its industrials peers
- Product roadmap and go-to-market strategy need to be reconsidered as its backlog has averaged 6.8% declines over the past two years
- Waning returns on capital imply its previous profit engines are losing steam
At $45.28 per share, Leonardo DRS trades at 33.5x forward P/E. Dive into our free research report to see why there are better opportunities than DRS.
One High-Flying Stock to Watch:
Parker-Hannifin (PH)
Forward P/E Ratio: 28.7x
Founded in 1917, Parker Hannifin (NYSE: PH) is a manufacturer of motion and control systems for a wide variety of mobile, industrial and aerospace markets.
Why Do We Watch PH?
- Disciplined cost controls and effective management resulted in a strong long-term operating margin of 19.1%, and its profits increased over the last five years as it scaled
- 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
- PH is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders, and its improved cash conversion implies it’s becoming a less capital-intensive business
Parker-Hannifin is trading at $1,065 per share, or 28.7x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
ALSO WORTH WATCHING: Top 5 Momentum Stocks. The best time to own a great stock is when the market is finally noticing it. These aren’t just high-quality businesses. Something is happening with them right now. Elite fundamentals meet near-term momentum — both boxes checked at the same time.
Find out which stocks our AI platform is flagging this week. See this week’s Strong Momentum stocks — FREE. Get Our Strong Momentum Stocks for Free HERE.
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+214% between June 2020 and June 2025). Find your next big winner with StockStory today.
