3 Low-Volatility Stocks with Warning Signs

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. That said, here are three low-volatility stocks to steer clear of and a few better alternatives.

Wiley (WLY)

Rolling One-Year Beta: 0.40

With roots dating back to 1807 when Charles Wiley opened a small printing shop in Manhattan, John Wiley & Sons (NYSE:WLY) is a global academic publisher that provides scientific journals, books, digital courseware, and knowledge solutions for researchers, students, and professionals.

Why Is WLY Risky?

1. Sales tumbled by 2.2% annually over the last five years, showing market trends are working against its favor during this cycle
2. Estimated sales for the next 12 months are flat and imply a softer demand environment
3. Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 4.3 percentage points

At $31.50 per share, Wiley trades at 1x trailing 12-month price-to-sales. To fully understand why you should be careful with WLY, check out our full research report (it’s free).

Waste Connections (WCN)

Rolling One-Year Beta: 0.20

Operating a network of municipal solid waste landfills in the U.S. and Canada, Waste Connections (NYSE:WCN) is North America's third-largest waste management company providing collection, disposal, and recycling services.

Why Do We Think Twice About WCN?

1. Absence of organic revenue growth over the past two years suggests it may have to lean into acquisitions to drive its expansion
2. Expenses have increased as a percentage of revenue over the last five years as its operating margin fell by 5 percentage points
3. Below-average returns on capital indicate management struggled to find compelling investment opportunities, and its falling returns suggest its earlier profit pools are drying up

Waste Connections is trading at $166.57 per share, or 30x forward P/E. Check out our free in-depth research report to learn more about why WCN doesn’t pass our bar.

Selective Insurance Group (SIGI)

Rolling One-Year Beta: 0.17

Founded in 1926 during the early days of automobile insurance, Selective Insurance Group (NASDAQ:SIGI) is a property and casualty insurance company that sells commercial, personal, and excess and surplus lines insurance products through independent agents.

Why Is SIGI Not Exciting?

1. Costs have risen faster than its revenue over the last five years, causing its combined ratio to worsen by 2.3 percentage points
2. Incremental sales over the last two years were less profitable as its 9.2% annual earnings per share growth lagged its revenue gains
3. Annual book value per share growth of 6.4% over the last five years was below our standards for the insurance sector

Selective Insurance Group’s stock price of $82.82 implies a valuation ratio of 1.5x forward P/B. Dive into our free research report to see why there are better opportunities than SIGI.

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