3 Low-Volatility Stocks We Think Twice About

Stability is great, but low-volatility stocks may struggle to deliver market-beating returns over time as they sometimes underperform during bull markets.

Choosing the wrong investments can cause you to fall behind, which is why we started StockStory – to separate the winners from the losers. Keeping that in mind, here are three low-volatility stocks to steer clear of and a few better alternatives.

Rolling One-Year Beta: 0.70

Nicknamed “the Excel killer” by some finance professionals for its ability to eliminate spreadsheet chaos, Workiva (NYSE:WK) provides a cloud-based platform that enables organizations to streamline financial reporting, ESG, and compliance processes with connected data and automation.

Why Is WK Not Exciting?

1. Operating margin failed to increase over the last year, indicating the company couldn’t optimize its expenses

2. Capital intensity will likely ramp up in the next year as its free cash flow margin is expected to contract by 1.9 percentage points

Workiva’s stock price of $85.01 implies a valuation ratio of 5.1x forward price-to-sales. If you’re considering WK for your portfolio, see our FREE research report to learn more.

Rolling One-Year Beta: 0.31

Formed in 1984 as Bell Atlantic after the breakup of Bell System into seven companies, Verizon (NYSE:VZ) is a telecom giant providing a range of communications and internet services.

Why Do We Steer Clear of VZ?

1. Underwhelming customer growth over the past two years shows the company faced challenges in winning new contracts

2. Demand will likely be soft over the next 12 months as Wall Street’s estimates imply tepid growth of 1.6%

3. Incremental sales over the last five years were less profitable as its earnings per share were flat while its revenue grew

Verizon is trading at $39.76 per share, or 8.4x forward P/E. Dive into our free research report to see why there are better opportunities than VZ.

Rolling One-Year Beta: 0.22

Processing approximately one-third of the adult U.S. population’s lab tests annually, Quest Diagnostics (NYSE:DGX) provides laboratory testing and diagnostic information services to patients, physicians, hospitals, and other healthcare providers across the United States.

Why Does DGX Give Us Pause?

1. Annual sales growth of 5.3% over the last five years lagged behind its healthcare peers as its large revenue base made it difficult to generate incremental demand

2. Day-to-day expenses have swelled relative to revenue over the last five years as its adjusted operating margin fell by 9.7 percentage points

3. Eroding returns on capital suggest its historical profit centers are aging