3 Volatile Stocks Skating on Thin Ice

Volatility cuts both ways - while it creates opportunities, it also increases risk, making sharp declines just as likely as big gains. This unpredictability can shake out even the most experienced investors.

Navigating these stocks isn’t easy, which is why StockStory helps you find Comfort In Chaos. Keeping that in mind, here are three volatile stocks to steer clear of and a few better alternatives.

European Wax Center (EWCZ)

Rolling One-Year Beta: 1.51

Founded by two siblings, European Wax Center (NASDAQ:EWCZ) is a beauty and waxing salon chain specializing in professional wax services and skincare products.

Why Are We Wary of EWCZ?

1. Poor same-store sales performance over the past two years indicates it’s having trouble bringing new shoppers into its stores
2. Forecasted revenue decline of 2.4% for the upcoming 12 months implies demand will fall off a cliff
3. Underwhelming 8.5% return on capital reflects management’s difficulties in finding profitable growth opportunities

At $3.57 per share, European Wax Center trades at 10x forward P/E. Dive into our free research report to see why there are better opportunities than EWCZ.

The Pennant Group (PNTG)

Rolling One-Year Beta: 0.60

Spun off from The Ensign Group in 2019 to focus on non-skilled nursing healthcare services, Pennant Group (NASDAQ:PNTG) operates home health, hospice, and senior living facilities across 13 western and midwestern states, serving patients of all ages including seniors.

Why Does PNTG Give Us Pause?

1. Smaller revenue base of $748.2 million means it hasn’t achieved the economies of scale that some industry juggernauts enjoy
2. Free cash flow margin dropped by 5.4 percentage points over the last five years, implying the company became more capital intensive as competition picked up
3. 6× net-debt-to-EBITDA ratio makes lenders less willing to extend additional capital, potentially necessitating dilutive equity offerings

The Pennant Group is trading at $28.17 per share, or 24.8x forward P/E. To fully understand why you should be careful with PNTG, check out our full research report (it’s free).

Fortrea (FTRE)

Rolling One-Year Beta: 1.68

Spun off from Labcorp in 2023 to focus exclusively on clinical research services, Fortrea (NASDAQ:FTRE) is a contract research organization that helps pharmaceutical, biotech, and medical device companies develop and bring their products to market through clinical trials and support services.

Why Do We Pass on FTRE?

1. Sales tumbled by 6.7% annually over the last two years, showing market trends are working against its favor during this cycle
2. Earnings per share have dipped by 49.5% annually over the past three years, which is concerning because stock prices follow EPS over the long term
3. High net-debt-to-EBITDA ratio of 5× increases the risk of forced asset sales or dilutive financing if operational performance weakens

Fortrea’s stock price of $5.95 implies a valuation ratio of 4.5x forward P/E. Check out our free in-depth research report to learn more about why FTRE doesn’t pass our bar.

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.

While this has caused many investors to adopt a "fearful" wait-and-see approach, we’re leaning into our best ideas that can grow regardless of the political or macroeconomic climate. Take advantage of Mr. Market by checking out our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.

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 Sterling Infrastructure (+1,096% five-year return). Find your next big winner with StockStory today for free.