2 High-Flying Stocks with Competitive Advantages and 1 We Question

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 two high-flying stocks with strong fundamentals and one with big downside risk.

One High-Flying Stock to Sell:

nLIGHT (LASR)

Forward P/E Ratio: 93.9x

Founded by a former CEO and Harvard-educated entrepreneur Scott Keeneyn, nLIGHT (NASDAQ:LASR) offers semiconductor and fiber lasers to the industrial, aerospace & defense, and medical sectors.

Why Are We Cautious About LASR?

1. Sales trends were unexciting over the last five years as its 3.8% annual growth was below the typical industrials company

2. Persistent operating margin losses suggest the business manages its expenses poorly

3. Cash-burning history makes us doubt the long-term viability of its business model

At $35.20 per share, nLIGHT trades at 93.9x forward P/E. To fully understand why you should be careful with LASR, check out our full research report (it’s free).

Two High-Flying Stocks to Watch:

Incyte (INCY)

Forward P/E Ratio: 56.8x

Founded in 1991 and evolving from a genomics research firm to a commercial-stage drug developer, Incyte (NASDAQ:INCY) is a biopharmaceutical company that discovers, develops, and commercializes proprietary therapeutics for cancer and inflammatory diseases.

Why Will INCY Beat the Market?

1. Annual revenue growth of 22.8% over the past two years was outstanding, reflecting market share gains this cycle

2. Free cash flow margin expanded by 13 percentage points over the last five years, providing additional flexibility for investments and share buybacks/dividends

3. Improving returns on capital reflect management’s ability to monetize investments

Incyte’s stock price of $112.58 implies a valuation ratio of 56.8x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.

agilon health (AGL)

Forward P/E Ratio: 53.7x

Transforming how doctors care for seniors by shifting financial incentives from volume to outcomes, agilon health (NYSE:AGL) provides a platform that helps primary care physicians transition to value-based care models for Medicare patients through long-term partnerships and global capitation arrangements.

Why Do We Watch AGL?