3 Volatile Stocks We're Skeptical Of

A highly volatile stock can deliver big gains - or just as easily wipe out a portfolio if things go south. While some investors embrace risk, mistakes can be costly for those who aren’t prepared.

These stocks can be a rollercoaster, and StockStory is here to guide you through the ups and downs. Keeping that in mind, here are three volatile stocks to steer clear of and a few better alternatives.

Matson (MATX)

Rolling One-Year Beta: 1.21

Founded by a Swedish orphan, Matson (NYSE:MATX) is a provider of ocean transportation and logistics services.

Why Does MATX Give Us Pause?

1. 4.3% annual revenue growth over the last two years was slower than its industrials peers
2. Free cash flow margin shrank by 8.3 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
3. Diminishing returns on capital suggest its earlier profit pools are drying up

At $162.18 per share, Matson trades at 12.1x forward P/E. Read our free research report to see why you should think twice about including MATX in your portfolio.

CDW (CDW)

Rolling One-Year Beta: 1.14

Serving as a crucial bridge between technology manufacturers and end users since 1984, CDW (NASDAQ:CDW) is a multi-brand provider of information technology solutions that helps businesses and public sector organizations select, implement, and manage hardware, software, and IT services.

Why Are We Cautious About CDW?

1. The company has faced growth challenges as its 2.4% annual revenue increases over the last two years fell short of other business services companies
2. Projected sales growth of 2.4% for the next 12 months suggests sluggish demand
3. Earnings per share were flat over the last two years and fell short of the peer group average

CDW is trading at $126.63 per share, or 12.1x forward P/E. If you’re considering CDW for your portfolio, see our FREE research report to learn more.

ScanSource (SCSC)

Rolling One-Year Beta: 1.12

Operating as a crucial link in the technology supply chain since 1992, ScanSource (NASDAQ:SCSC) is a hybrid distributor that connects hardware, software, and cloud services from technology suppliers to resellers and business customers.

Why Does SCSC Worry Us?

1. Customers postponed purchases of its products and services this cycle as its revenue declined by 8.6% annually over the last two years
2. Estimated sales growth of 3% for the next 12 months is soft and implies weaker demand
3. Poor free cash flow margin of 2.6% for the last five years limits its freedom to invest in growth initiatives, execute share buybacks, or pay dividends

ScanSource’s stock price of $35.92 implies a valuation ratio of 8.3x forward P/E. To fully understand why you should be careful with SCSC, check out our full research report (it’s free).

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