Expensive stocks typically earn their valuations through superior growth rates that other companies simply can’t match. The flip side though is that these lofty expectations make them particularly susceptible to drawdowns when market sentiment shifts.
Determining whether a company’s quality justifies its price causes headaches for nearly all investors, which is why we started StockStory - to help you separate the real opportunities from the speculative ones. That said, here are two high-flying stocks expanding their competitive advantages and one where the price is not right.
One High-Flying Stock to Sell:
STAAR Surgical (STAA)
Forward P/E Ratio: 58.7x
With over 2.5 million implants performed worldwide, STAAR Surgical (NASDAQ: STAA) designs and manufactures implantable lenses that correct vision problems without removing the eye's natural lens.
Why Is STAA Risky?
- Constant currency growth was below our standards over the past two years, suggesting it might need to invest in product improvements to get back on track
- Free cash flow margin shrank by 35.2 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
- Diminishing returns on capital suggest its earlier profit pools are drying up
STAAR Surgical is trading at $25.31 per share, or 58.7x forward P/E. Check out our free in-depth research report to learn more about why STAA doesn’t pass our bar.
Two High-Flying Stocks to Buy:
Vertiv (VRT)
Forward P/E Ratio: 38.6x
Formerly part of Emerson Electric, Vertiv (NYSE: VRT) manufactures and services infrastructure technology products for data centers and communication networks.
Why Do We Love VRT?
- Core business is healthy and doesn’t need acquisitions to boost sales as its organic revenue growth averaged 21% over the past two years
- Free cash flow margin grew by 7.9 percentage points over the last five years, giving the company more chips to play with
- Returns on capital are climbing as management makes more lucrative bets
Vertiv’s stock price of $191.56 implies a valuation ratio of 38.6x forward P/E. Is now the time to initiate a position? See for yourself in our full research report, it’s free for active Edge members.
American Superconductor (AMSC)
Forward P/E Ratio: 83.8x
Founded in 1987, American Superconductor (NASDAQ: AMSC) has shifted from superconductor research to developing power systems, adapting to changing energy grid needs and naval technology requirements.
Why Should You Buy AMSC?
- Annual revenue growth of 49% over the past two years was outstanding, reflecting market share gains this cycle
- Free cash flow turned positive over the last five years, indicating the company has passed a significant test
- Historical investments are beginning to pay off as its returns on capital are growing
At $46.80 per share, American Superconductor trades at 83.8x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free for active Edge members.
Stocks We Like Even More
Trump’s April 2025 tariff bombshell triggered a massive market selloff, but stocks have since staged an impressive recovery, leaving those who panic sold on the sidelines.
Take advantage of the rebound by checking out our Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 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 for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today
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