5 Stocks To Avoid Right Now

Picking which stocks to sell or avoid can be a tricky business. Even stocks that are deemed "overvalued" can continue trading on momentum for days, weeks and even months before correcting. However, stocks that have stretched valuations typically have the furthest to fall in the event of a sell-off, making them prime candidates to avoid if you're looking to reduce the risk in your portfolio.

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To help identify stocks that should be avoided, GOBankingRates looked at the 50 most overvalued stocks in terms of price-to-earnings ratios and cross-referenced these with stocks labeled 4 or 5 by Zacks Investment Research, which correspond to "sell" and "strong sell" ratings, respectively. The 5 most overvalued stocks by these parameters are listed here.

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There's no guarantee these stocks won't get even more overvalued before they finally meet selling pressure. However, if you're looking to avoid risk, you might consider consulting with your financial advisor and selecting different stocks to own.

Tyler Technologies (TYL)

• P/E Ratio: 89.64
• Zacks Rank: 4
• Price: $396.59
• Market Cap: $16,156,560,883
• EPS: $4.42
• VGM Score: B

Tyler Technologies has had a great run, posting gains of over 70% in 2019 and 42% in 2020. This has pushed the stock up to an overinflated P/E. one of the reasons Zacks views the stock as a "sell." Some investors have begun taking profits in the stock, which is down over 7% year-to-date.

Duke Energy Corp. (DUK)

• P/E Ratio: 58.73
• Zacks Rank: 4
• Price: $102.49
• Market Cap: $78,837,243,417
• EPS: $1.75
• VGM Score: B

Utilities don't often make the list of "most-overvalued" stocks, but then again, most utilities don't sport a P/E ratio of 58.73 times earnings. The consensus among analysts is that the stock has maybe a few points left in it for the next 12 months, if that.

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Marketaxess Holdings (MKTX)

• P/E Ratio: 55.89
• Zacks Rank: 4
• Price: $446.70
• Market Cap: $16,966,863,619
• EPS: $7.99
• VGM Score: D

In terms of analytics, Mareketaxess Holdings stock doesn't have much going for it. The combination of P/E of 50+, a Zacks "sell" ranking and a value/growth/momentum score of "D" add up to a stock that's likely overvalued.

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Abiomed Inc. (ABMD)

• P/E Ratio: 55.28
• Zacks Rank: 5
• Price: $272.97
• Market Cap: $12,346,697,936
• EPS: $4.94
• VGM Score: C

Medical device maker Abiomed saves lives with its Impella® Heart Pump, but its stock movements might make your heart race as well. After losses of over 20% and 46% in 2018 and 2019, respectively, the stock rocketed up over 94% in 2020 before giving back another 12% year-to-date in 2021. Based on its expected earnings, Zacks considers the stock a "strong sell."

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Autodesk Inc. (ADSK)

• P/E Ratio: 50.14
• Zacks Rank: 4
• Price: $272.75
• Market Cap: $60,022,155,975
• EPS: $5.44
• VGM Score: B

Zacks recommends investors sell Autodesk after gains of 44% in 2019 and 65% in 2020. With a P/E of over 50, the project software company may be a bit ahead of itself at these levels.

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In order to find stocks to avoid buying right now, GOBankingRates analyzed every component of the S&P 500, downloaded from Barchart. GOBankingRates used Google Finance to find the 100 most overvalued stocks in the index in terms of (1) price to earnings ratio at market close May 18, 2021. Then, GOBankingRates found (2) the Zacks Rank for each stock and identified the five stocks which are both overvalued in terms of P/E ratio and have a Zacks Rank of 4 or 5, which correspond to "sell" and "strong sell" respectively. The Zacks Rank classifies stocks into one of five categories according to four factors related to earnings. GOBankingRates also provided supplemental data on the (3) closing price, (4) market cap and (5) earnings per share for each company at market close on May 18, 2021 according to Google Finance, as well as the (6) VGM score for each company according to Zacks, which scores stocks on their value, growth, and momentum. All data was gathered on and up to date as of May 18, 2021.

About the Author

John Csiszar

After earning a B.A. in English with a Specialization in Business from UCLA, John Csiszar worked in the financial services industry as a registered representative for 18 years. Along the way, Csiszar earned both Certified Financial Planner and Registered Investment Adviser designations, in addition to being licensed as a life agent, while working for both a major Wall Street wirehouse and for his own investment advisory firm. During his time as an advisor, Csiszar managed over $100 million in client assets while providing individualized investment plans for hundreds of clients.

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