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.
Dillard's (DDS)
Rolling One-Year Beta: 0.88
With stores located largely in the Southern and Western US, Dillard’s (NYSE:DDS) is a department store chain that sells clothing, cosmetics, accessories, and home goods.
Why Is DDS Not Exciting?
- Poor same-store sales performance over the past two years indicates it’s having trouble bringing new shoppers into its brick-and-mortar locations
- Estimated sales decline of 2.1% for the next 12 months implies an even more challenging demand environment
- Day-to-day expenses have swelled relative to revenue over the last year as its operating margin fell by 2.1 percentage points
Dillard's is trading at $396.02 per share, or 9.5x forward EV-to-EBITDA. Check out our free in-depth research report to learn more about why DDS doesn’t pass our bar.
Cracker Barrel (CBRL)
Rolling One-Year Beta: 0.33
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 Pass on CBRL?
- Sales trends were unexciting over the last five years as its 2.3% annual growth was below the typical restaurant company
- Earnings per share fell by 17.1% annually over the last five years while its revenue grew, showing its incremental sales were much less profitable
- 5× net-debt-to-EBITDA ratio makes lenders less willing to extend additional capital, potentially necessitating dilutive equity offerings
Cracker Barrel’s stock price of $58 implies a valuation ratio of 21.3x forward P/E. Dive into our free research report to see why there are better opportunities than CBRL.
Ball (BALL)
Rolling One-Year Beta: 0.43
Started with a $200 loan in 1880, Ball (NYSE:BLL) manufactures aluminum packaging for beverages, personal care, and household products as well as aerospace systems and other technologies.
Why Are We Out on BALL?
- 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
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of -0.6% for the last five years
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
At $53.58 per share, Ball trades at 14.8x forward P/E. Read our free research report to see why you should think twice about including BALL in your portfolio.
High-Quality Stocks for All Market Conditions
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