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.
Determining whether a company’s quality justifies its price causes headaches for nearly all investors, which is why we started StockStory - to help you separate the real opportunities from the speculative ones. That said, here are two high-flying stocks expanding their competitive advantages and one where the price is not right.
One High-Flying Stock to Sell:
Smith & Wesson (SWBI)
Forward P/E Ratio: 41.9x
With a history dating back to 1852, Smith & Wesson (NASDAQ: SWBI) is a firearms manufacturer known for its handguns and rifles.
Why Do We Avoid SWBI?
- Annual sales declines of 10.2% for the past five years show its products and services struggled to connect with the market
- Low free cash flow margin of 2.1% for the last two years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
- Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results
Smith & Wesson’s stock price of $11.76 implies a valuation ratio of 41.9x forward P/E. Dive into our free research report to see why there are better opportunities than SWBI.
Two High-Flying Stocks to Buy:
Sterling (STRL)
Forward P/E Ratio: 35.9x
Involved in the construction of a major highway, the Grand Parkway in Houston, TX, Sterling Infrastructure (NASDAQ: STRL) provides civil infrastructure construction.
Why Will STRL Outperform?
- Annual revenue growth of 9.4% over the last five years beat the sector average and underscores the unique value of its offerings
- Free cash flow margin expanded by 8.7 percentage points over the last five years, providing additional flexibility for investments and share buybacks/dividends
- Returns on capital are climbing as management makes more lucrative bets
At $412 per share, Sterling trades at 35.9x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
Eli Lilly (LLY)
Forward P/E Ratio: 30.1x
Founded in 1876 by a Civil War veteran and pharmacist frustrated with the poor quality of medicines, Eli Lilly (NYSE: LLY) discovers, develops, and manufactures pharmaceutical products for conditions including diabetes, obesity, cancer, immunological disorders, and neurological diseases.
Why Is LLY a Good Business?
- Annual revenue growth of 38.2% over the past two years was outstanding, reflecting market share gains this cycle
- Adjusted operating margin expanded by 21.2 percentage points over the last two years as it scaled and became more efficient
- Share buybacks catapulted its annual earnings per share growth to 25%, which outperformed its revenue gains over the last five years
Eli Lilly is trading at $1,020 per share, or 30.1x forward P/E. Is now the right time to buy? See for yourself in our in-depth research report, it’s free.
High-Quality Stocks for All Market Conditions
Your portfolio can’t afford to be based on yesterday’s story. The risk in a handful of heavily crowded stocks is rising daily.
The names generating the next wave of massive growth are right here in 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 244% over the last five years (as of June 30, 2025).
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 Exlservice (+354% five-year return). Find your next big winner with StockStory today.
