Market swings can be tough to stomach, and volatile stocks often experience exaggerated moves in both directions. While many thrive during risk-on environments, many also struggle to maintain investor confidence when the ride gets bumpy.
At StockStory, our job is to help you avoid costly mistakes and stay on the right side of the trade. Keeping that in mind, here are three volatile stocks best left to the gamblers and some better opportunities instead.
Genesco (GCO)
Rolling One-Year Beta: 2.17
Spanning a broad range of styles, brands, and prices, Genesco (NYSE:GCO) sells footwear, apparel, and accessories through multiple brands and banners.
Why Do We Steer Clear of GCO?
- Disappointing same-store sales over the past two years show customers aren’t responding well to its product selection and in-store experience
- Performance over the past five years shows its incremental sales were much less profitable, as its earnings per share fell by 19.4% annually
- High net-debt-to-EBITDA ratio of 6× increases the risk of forced asset sales or dilutive financing if operational performance weakens
At $19.40 per share, Genesco trades at 0.1x forward price-to-sales. Dive into our free research report to see why there are better opportunities than GCO.
OPENLANE (KAR)
Rolling One-Year Beta: 1.11
Facilitating the sale of approximately 1.3 million used vehicles in 2023, OPENLANE (NYSE:KAR) operates digital marketplaces that connect sellers and buyers of used vehicles across North America and Europe, facilitating wholesale transactions.
Why Does KAR Fall Short?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 8.5% annually over the last five years
- Sales were less profitable over the last five years as its earnings per share fell by 16.3% annually, worse than its revenue declines
- 6× net-debt-to-EBITDA ratio makes lenders less willing to extend additional capital, potentially necessitating dilutive equity offerings
OPENLANE is trading at $18.88 per share, or 19x forward price-to-earnings. Check out our free in-depth research report to learn more about why KAR doesn’t pass our bar.
Taboola (TBLA)
Rolling One-Year Beta: 1.17
Often appearing as those "You May Also Like" or "Recommended For You" boxes at the bottom of news articles, Taboola (NASDAQ:TBLA) operates a digital platform that recommends personalized content to users across publisher websites, helping both publishers monetize their sites and advertisers reach target audiences.
Why Are We Wary of TBLA?
- Earnings per share have dipped by 17.2% annually over the past four years, which is concerning because stock prices follow EPS over the long term
- Significant decline in its free cash flow margin over the last five years reflects the company’s increased investments to defend its market position
- Negative returns on capital show that some of its growth strategies have backfired
Taboola’s stock price of $3.00 implies a valuation ratio of 8.2x forward price-to-earnings. If you’re considering TBLA for your portfolio, see our FREE research report to learn more.
Stocks We Like More
Market indices reached historic highs following Donald Trump’s presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth.
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Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like United Rentals (+322% five-year return). Find your next big winner with StockStory today for free.