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 three high-flying stocks climbing an uphill battle and some alternatives you should consider instead.
AAON (AAON)
Forward P/E Ratio: 48x
Backed by two million square feet of lab testing space, AAON (NASDAQ: AAON) makes heating, ventilation, and air conditioning equipment for different types of buildings.
Why Does AAON Worry Us?
- Efficiency has decreased over the last five years as its operating margin fell by 6 percentage points
- Earnings per share fell by 22.7% annually over the last two years while its revenue grew, showing its incremental sales were much less profitable
- Free cash flow margin shrank by 27.2 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
AAON is trading at $91.59 per share, or 48x forward P/E. Read our free research report to see why you should think twice about including AAON in your portfolio.
Richardson Electronics (RELL)
Forward P/E Ratio: 58.1x
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?
- Backlog has dropped by 2% on average over the past two years, suggesting it’s losing orders as competition picks up
- Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
Richardson Electronics’s stock price of $10.29 implies a valuation ratio of 58.1x forward P/E. If you’re considering RELL for your portfolio, see our FREE research report to learn more.
Bio-Techne (TECH)
Forward P/E Ratio: 31.9x
With a catalog of hundreds of thousands of specialized biological products used in laboratories worldwide, Bio-Techne (NASDAQ: TECH) develops and manufactures specialized reagents, instruments, and services that help researchers study biological processes and enable diagnostic testing and cell therapy development.
Why Is TECH Risky?
- Organic sales performance over the past two years indicates the company may need to make strategic adjustments or rely on M&A to catalyze faster growth
- Modest revenue base of $1.22 billion gives it less fixed cost leverage and fewer distribution channels than larger companies
- Free cash flow margin shrank by 11.6 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
At $63.75 per share, Bio-Techne trades at 31.9x forward P/E. Dive into our free research report to see why there are better opportunities than TECH.
Stocks We Like More
The market’s up big this year - but there’s a catch. Just 4 stocks account for half the S&P 500’s entire gain. That kind of concentration makes investors nervous, and for good reason. While everyone piles into the same crowded names, smart investors are hunting quality where no one’s looking - and paying a fraction of the price. Check out the high-quality names we’ve flagged in our Top 5 Growth Stocks for this month. 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-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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