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.
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 is one high-flying stock with strong fundamentals and two climbing an uphill battle.
Two High-Flying Stocks to Sell:
Woodward (WWD)
Forward P/E Ratio: 35.7x
Initially designing controls for water wheels in the early 1900s, Woodward (NASDAQ:WWD) designs, services, and manufactures energy control products and optimization solutions.
Why Do We Think Twice About WWD?
- 4.9% annual revenue growth over the last five years was slower than its industrials peers
- Earnings growth underperformed the sector average over the last five years as its EPS grew by just 7.1% annually
- 11.2 percentage point decline in its free cash flow margin over the last five years reflects the company’s increased investments to defend its market position
Woodward’s stock price of $265.49 implies a valuation ratio of 35.7x forward P/E. To fully understand why you should be careful with WWD, check out our full research report (it’s free for active Edge members).
West Pharmaceutical Services (WST)
Forward P/E Ratio: 37.2x
Founded in 1923 and serving as a critical link in the pharmaceutical supply chain, West Pharmaceutical Services (NYSE:WST) manufactures specialized packaging, containment systems, and delivery devices for injectable drugs and healthcare products.
Why Does WST Fall Short?
- Annual revenue growth of 1.5% over the last two years was below our standards for the healthcare sector
- Day-to-day expenses have swelled relative to revenue over the last five years as its adjusted operating margin fell by 5.5 percentage points
- Diminishing returns on capital suggest its earlier profit pools are drying up
West Pharmaceutical Services is trading at $276.20 per share, or 37.2x forward P/E. Read our free research report to see why you should think twice about including WST in your portfolio.
One High-Flying Stock to Watch:
Palo Alto Networks (PANW)
Forward P/S Ratio: 14.7x
Founded in 2005 by security visionary Nir Zuk who sought to reimagine firewall technology, Palo Alto Networks (NASDAQ:PANW) provides AI-powered cybersecurity platforms that protect organizations' networks, clouds, and endpoints from sophisticated threats.
Why Is PANW on Our Radar?
- 22% annual revenue growth over the last five years surpassed the sector average as its software resonated with customers
- User-friendly software enables clients to ramp up spending quickly, leading to the speedy recovery of customer acquisition costs
- Robust free cash flow margin of 37.6% gives it many options for capital deployment
At $218.27 per share, Palo Alto Networks trades at 14.7x forward price-to-sales. Is now a good time to buy? See for yourself in our comprehensive research report, it’s free for active Edge members .
Stocks We Like Even More
Donald Trump’s April 2025 "Liberation Day" tariffs sent markets into a tailspin, but stocks have since rebounded strongly, proving that knee-jerk reactions often create the best buying opportunities.
The smart money is already positioning for the next leg up. Don’t miss out on the recovery - check 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-small-cap company Comfort Systems (+782% 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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