1 High-Flying Stock on Our Buy List and 2 We Find Risky
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:
Semtech (SMTC)
Forward P/E Ratio: 32.2x
A public company since the late 1960s, Semtech (NASDAQ:SMTC) is a provider of analog and mixed-signal semiconductors used for Internet of Things systems and cloud connectivity.
Why Are We Hesitant About SMTC?
- Efficiency has decreased over the last five years as its operating margin fell by 16 percentage points
- Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 10.6 percentage points
- Negative returns on capital show that some of its growth strategies have backfired
At $167.37 per share, Semtech trades at 32.2x forward P/E. To fully understand why you should be careful with SMTC, check out our full research report (it’s free).
Cracker Barrel (CBRL)
Forward P/E Ratio: 64.3x
Known for its country-themed food and merchandise, Cracker Barrel (NASDAQ:CBRL) is a beloved American restaurant and retail chain that celebrates the warmth and charm of Southern hospitality.
Why Do We Avoid CBRL?
- Lagging same-store sales over the past two years suggest it might have to change its pricing and marketing strategy to stimulate demand
- Earnings per share have contracted by 32.8% annually over the last seven years, a headwind for returns as stock prices often echo long-term EPS performance
- High net-debt-to-EBITDA ratio of 7× increases the risk of forced asset sales or dilutive financing if operational performance weakens
Cracker Barrel’s stock price of $50.40 implies a valuation ratio of 64.3x forward P/E. Dive into our free research report to see why there are better opportunities than CBRL.
One High-Flying Stock to Buy:
Cintas (CTAS)
Forward P/E Ratio: 36.1x
Starting as a family business collecting and cleaning shop rags in Cincinnati, Cintas (NASDAQ:CTAS) provides corporate identity uniforms, facility services, and safety products to over one million businesses across North America.
Why Will CTAS Outperform?
- Impressive 9.6% annual revenue growth over the last five years indicates it’s winning market share this cycle
- Strong free cash flow margin of 16.4% enables it to reinvest or return capital consistently
- Stellar returns on capital showcase management’s ability to surface highly profitable business ventures, and its rising returns show it’s making even more lucrative bets
Cintas is trading at $201.50 per share, or 36.1x forward P/E. Is now the time to initiate a position? See for yourself in our in-depth research report, it’s free.
Stocks We Like Even More
WHILE YOU’RE HERE: Top 9 Market-Beating Stocks. The best stocks don’t just beat the market once. They do it again. And again. Robust revenue growth, rising free cash flow, returns on capital that leave their competition in the dust. The market has already rewarded these businesses.
But our AI platform says the party isn’t over. Find out which 9 stocks made the cut this week — FREE. Get Our Top 9 Market-Beating 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.