A stock with low volatility can be reassuring, but it doesn’t always mean strong long-term performance. Investors who prioritize stability may miss out on higher-reward opportunities elsewhere.

Finding the right balance between safety and returns isn’t easy, which is why StockStory is here to help. That said, here are three low-volatility stocks to steer clear of and a few better alternatives.

Tilly's (TLYS)

Rolling One-Year Beta: -0.73

With an emphasis on skate and surf culture, Tilly’s (NYSE: TLYS) is a specialty retailer that sells clothing, footwear, and accessories geared towards fashion-forward teens and young adults.

Why Are We Bearish on TLYS?

1. Store closures are a headwind for growth and suggest it’s rightsizing operations to optimize sales at existing locations
2. Persistent operating margin losses suggest the business manages its expenses poorly

Tilly’s stock price of $4.15 implies a valuation ratio of 34.2x forward P/E. To fully understand why you should be careful with TLYS, check out our full research report (it’s free).

Nordson (NDSN)

Rolling One-Year Beta: 0.46

Founded in 1954, Nordson Corporation (NASDAQ: NDSN) manufactures dispensing equipment and industrial adhesives, sealants and coatings.

Why Does NDSN Worry Us?

1. Core business is underperforming as its organic revenue has disappointed over the past two years, suggesting it might need acquisitions to stimulate growth
2. Estimated sales growth of 6.4% for the next 12 months is soft and implies weaker demand
3. Eroding returns on capital suggest its historical profit centers are aging

Nordson is trading at $319.89 per share, or 25.2x forward P/E. Check out our free in-depth research report to learn more about why NDSN doesn’t pass our bar.

KB Home (KBH)

Rolling One-Year Beta: 0.43

The first homebuilder to be listed on the NYSE, KB Home (NYSE: KBH) is a homebuilding company targeting the first-time home buyer and move-up buyer markets.

Why Are We Out on KBH?

1. Sales pipeline suggests its future revenue growth won’t meet our standards as its backlog averaged 20.5% declines over the past two years
2. Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability

At $46.29 per share, KB Home trades at 13.5x forward P/E. Read our free research report to see why you should think twice about including KBH in your portfolio.

High-quality stocks for all market conditions

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