Expensive stocks typically earn their valuations through superior growth rates that other companies simply can’t match. The flip side though is that these lofty expectations make them particularly susceptible to drawdowns when market sentiment shifts.
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. Keeping that in mind, here are three high-flying stocks with big downside risk and some other investments you should consider instead.
Richardson Electronics (RELL)
Forward P/E Ratio: 37.5x
Founded in 1947, Richardson Electronics (NASDAQ:RELL) is a distributor of power grid and microwave tubes as well as consumables related to those products.
Why Do We Avoid RELL?
- 1.5% annual revenue growth over the last two years was slower than its industrials peers
- Cash-burning history makes us doubt the long-term viability of its business model
- Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
Richardson Electronics is trading at $13.34 per share, or 37.5x forward P/E. Check out our free in-depth research report to learn more about why RELL doesn’t pass our bar.
Strategy (MSTR)
Forward P/S Ratio: 97.5x
Once a traditional business intelligence software provider, Strategy (NASDAQ:MSTR) develops AI-powered enterprise analytics software while also functioning as a major corporate holder of Bitcoin cryptocurrency.
Why Do We Steer Clear of MSTR?
- MicroStrategy’s core analytics software has been eclipsed by its all-in Bitcoin strategy, leaving product innovation and enterprise deals starved for attention
- The company’s debt-financed Bitcoin buying ties shareholder fortunes to crypto swings and interest rates, amplifying downside risk and uncertainty
- On the bright side, its vast Bitcoin treasury gives Executive Chairman Michael Saylor a unique springboard to capture crypto upside and court investors seeking leveraged exposure to digital assets
At $177.85 per share, Strategy trades at 97.5x forward price-to-sales. If you’re considering MSTR for your portfolio, see our FREE research report to learn more.
Noble Corporation (NE)
Forward P/E Ratio: 43.4x
With origins dating back over a century to 1921, Noble Corporation (NYSE:NE) operates drilling rigs that oil and gas companies charter to drill wells in deep ocean waters and shallow seas.
Why Does NE Worry Us?
- Gross margin of 40.7% is below its competitors, leaving less money to invest in exploration and production
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 5.1% for the last five years
Noble Corporation’s stock price of $48.29 implies a valuation ratio of 43.4x forward P/E. To fully understand why you should be careful with NE, check out our full research report (it’s free).
Stocks We Like More
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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today.