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.
Separating true intrinsic value from speculation isn’t easy, especially during bull markets. That’s where StockStory comes in - to help you find high-quality companies that will stand the test of time. That said, here are two high-flying stocks with strong fundamentals and one with big downside risk.
One High-Flying Stock to Sell:
Flex (FLEX)
Forward P/E Ratio: 32.3x
Originally known as Flextronics until its 2016 rebranding, Flex (NASDAQ: FLEX) is a global manufacturing partner that designs, engineers, and builds products for companies across industries from medical devices to solar trackers.
Why Are We Cautious About FLEX?
- The company has faced growth challenges as its 2.8% annual revenue increases over the last two years fell short of other business services companies
- Low free cash flow margin of 2.8% for the last five years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
At $151.14 per share, Flex trades at 32.3x forward P/E. Check out our free in-depth research report to learn more about why FLEX doesn’t pass our bar.
Two High-Flying Stocks to Watch:
Vertiv (VRT)
Forward P/E Ratio: 46x
Formerly part of Emerson Electric, Vertiv (NYSE: VRT) manufactures and services infrastructure technology products for data centers and communication networks.
Why Will VRT Beat the Market?
- Existing business lines can expand without risky acquisitions as its organic revenue growth averaged 23.7% over the past two years
- Free cash flow margin increased by 22.4 percentage points over the last five years, giving the company more capital to invest or return to shareholders
- Returns on capital are growing as management capitalizes on its market opportunities
Vertiv’s stock price of $315.50 implies a valuation ratio of 46x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
Caterpillar (CAT)
Forward P/E Ratio: 35.2x
With its iconic yellow machinery working on construction sites, Caterpillar (NYSE: CAT) manufactures construction equipment like bulldozers, excavators, and parts and maintenance services.
Why Should CAT Be on Your Watchlist?
- Disciplined cost controls and effective management resulted in a strong long-term operating margin of 16.9%, and it turbocharged its profits by achieving some fixed cost leverage
- Free cash flow margin increased by 5 percentage points over the last five years, giving the company more capital to invest or return to shareholders
- Industry-leading 36.6% return on capital demonstrates management’s skill in finding high-return investments
Caterpillar is trading at $873.74 per share, or 35.2x forward P/E. Is now the right time to buy? See for yourself in our in-depth research report, it’s free.
Stocks We Like Even More
ONE MORE THING: Top 5 Growth Stocks. The biggest stock winners almost always had one thing in common before they ran. Revenue growing like crazy. Meta. CrowdStrike. Broadcom. Our AI flagged all three. They returned 315%, 314%, and 455%, respectively.
Find out which 5 stocks it’s flagging this month — FREE. Get Our Top 5 Growth Stocks for Free HERE.
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today.
