3 Low-Volatility Stocks That Fall Short

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. Keeping that in mind, here are three low-volatility stocks to steer clear of and a few better alternatives.

CSX (CSX)

Rolling One-Year Beta: 0.80

Established as part of the Chessie System and Seaboard Coast Line Industries merger, CSX (NASDAQ:CSX) is a transportation company specializing in freight rail services.

Why Are We Out on CSX?

1. Flat unit sales over the past two years imply it may need to invest in improvements to get back on track
2. Earnings per share decreased by more than its revenue over the last two years, showing each sale was less profitable
3. Free cash flow margin dropped by 21.5 percentage points over the last five years, implying the company became more capital intensive as competition picked up

CSX’s stock price of $35.40 implies a valuation ratio of 19.5x forward P/E. Dive into our free research report to see why there are better opportunities than CSX.

Agilent (A)

Rolling One-Year Beta: 0.85

Originally spun off from Hewlett-Packard in 1999 as its measurement and analytical division, Agilent Technologies (NYSE:A) provides analytical instruments, software, services, and consumables for laboratory workflows in life sciences, diagnostics, and applied chemical markets.

Why Is A Not Exciting?

1. Annual sales declines of 3% for the past two years show its products and services struggled to connect with the market during this cycle
2. 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
3. Free cash flow margin shrank by 3.6 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive

At $113.53 per share, Agilent trades at 19.5x forward P/E. Check out our free in-depth research report to learn more about why A doesn’t pass our bar.

West Pharmaceutical Services (WST)

Rolling One-Year Beta: 0.63

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 Are We Wary of WST?

1. Sales trends were unexciting over the last two years as its 1.6% annual growth was below the typical healthcare company
2. Efficiency has decreased over the last five years as its adjusted operating margin fell by 3.9 percentage points
3. Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability

West Pharmaceutical Services is trading at $239.26 per share, or 35.7x forward P/E. If you’re considering WST for your portfolio, see our FREE research report to learn more.

High-Quality Stocks for All Market Conditions

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