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.
Finding the right balance between price and quality can challenge even the most skilled investors. Luckily for you, we started StockStory to help you identify the real opportunities. That said, here is one high-flying stock with strong fundamentals and two with big downside risk.
Two High-Flying Stocks to Sell:
Marcus & Millichap (MMI)
Forward P/E Ratio: 138.5x
Founded in 1971, Marcus & Millichap (NYSE: MMI) specializes in commercial real estate investment sales, financing, research, and advisory services.
Why Are We Out on MMI?
- Flat sales over the last five years suggest it must innovate and find new ways to grow
- Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital
- Diminishing returns on capital suggest its earlier profit pools are drying up
Marcus & Millichap’s stock price of $29.08 implies a valuation ratio of 138.5x forward P/E. Dive into our free research report to see why there are better opportunities than MMI.
Transcat (TRNS)
Forward P/E Ratio: 33.8x
Serving the pharmaceutical, industrial manufacturing, energy, and chemical process industries, Transcat (NASDAQ: TRNS) provides measurement instruments and supplies.
Why Are We Wary of TRNS?
- Efficiency has decreased over the last five years as its operating margin fell by 1.7 percentage points
- Below-average returns on capital indicate management struggled to find compelling investment opportunities, and its shrinking returns suggest its past profit sources are losing steam
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
At $74.85 per share, Transcat trades at 33.8x forward P/E. Check out our free in-depth research report to learn more about why TRNS doesn’t pass our bar.
One High-Flying Stock to Watch:
Shake Shack (SHAK)
Forward P/E Ratio: 55.4x
Started as a hot dog cart in New York City's Madison Square Park, Shake Shack (NYSE: SHAK) is a fast-food restaurant known for its burgers and milkshakes.
Why Is SHAK on Our Radar?
- Aggressive strategy of rolling out new restaurants to gobble up whitespace is prudent given its same-store sales growth
- Same-store sales growth over the past two years shows it’s successfully drawing diners into its restaurants
- Operating profits and efficiency rose over the last year as it benefited from some fixed cost leverage
Shake Shack is trading at $93.44 per share, or 55.4x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free for active Edge members.
Stocks We Like Even More
Trump’s April 2025 tariff bombshell triggered a massive market selloff, but stocks have since staged an impressive recovery, leaving those who panic sold on the sidelines.
Take advantage of the rebound by checking out our Top 9 Market-Beating Stocks. 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-micro-cap company Kadant (+351% 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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