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.

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. Keeping that in mind, here is one high-flying stock with strong fundamentals and two climbing an uphill battle.

Two High-Flying Stocks to Sell:

Zillow (ZG)

Forward P/E Ratio: 42.9x

Founded by Expedia co-founders Lloyd Frink and Rich Barton, Zillow (NASDAQ: ZG) is the leading U.S. online real estate marketplace.

Why Should You Sell ZG?

1. Products and services have few die-hard fans as sales have declined by 7.8% annually over the last five years
2. Poor expense management has led to operating margin losses
3. Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions

Zillow’s stock price of $80.90 implies a valuation ratio of 42.9x forward P/E. If you’re considering ZG for your portfolio, see our FREE research report to learn more.

Latham (SWIM)

Forward P/E Ratio: 57.1x

Started as a family business, Latham (NASDAQ: SWIM) is a global designer and manufacturer of in-ground residential swimming pools and related products.

Why Does SWIM Give Us Pause?

1. Annual revenue declines of 7.7% over the last two years indicate problems with its market positioning
2. Capital intensity will likely ramp up in the next year as its free cash flow margin is expected to contract by 1.7 percentage points
3. Below-average returns on capital indicate management struggled to find compelling investment opportunities

Latham is trading at $8 per share, or 57.1x forward P/E. Dive into our free research report to see why there are better opportunities than SWIM.

One High-Flying Stock to Buy:

ServiceNow (NOW)

Forward P/S Ratio: 13.1x

Built on a single code base that processes over 4 billion workflow transactions daily, ServiceNow (NYSE: NOW) provides a cloud-based platform that helps organizations automate and digitize workflows across departments, from IT and HR to customer service and security.

Why Will NOW Outperform?

1. Demand is healthy as its current remaining performance obligations (cRPO) have averaged 22.9% growth over the last year, showing it’s securing new contracts for services yet to be fulfilled
2. Disciplined cost controls and effective management resulted in a strong trailing 12-month operating margin of 13.3%, and its profits increased over the last year as it scaled
3. Strong free cash flow margin of 31.9% enables it to reinvest or return capital consistently

At $898.60 per share, ServiceNow trades at 13.1x forward price-to-sales. Is now the time to initiate a position? Find out in our full research report, it’s free.

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-small-cap company Comfort Systems (+782% 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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