11 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 11 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.

Intuitive Surgical (ISRG)

• P/E Ratio: 86.46
• Zacks Rank: 5
• Price: $762.25
• Market Cap: $89,606,298,750
• EPS: $8.82
• VGM Score: D

Intuitive Surgical is a high-flyer that posted declining sales and earnings in 2020. If the company doesn’t rebound soon, its stock could suffer.

Nvidia (NVDA)

• P/E Ratio: 88.83
• Zacks Rank: 4
• Price: $543.64
• Market Cap: $336,513,169,067
• EPS: $6.12
• VGM Score: C

From a technical trading perspective, Nvidia, which has had a great run, is near the top of its trading range. Active traders may want to reduce risk in these areas, as stocks tend to regress to the mean over time.

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United Dominion Realty Trust (UDR)

• P/E Ratio: 89.97
• Zacks Rank: 4
• Price: $40.07
• Market Cap: $11,799,865,601
• EPS: $0.45
• VGM Score: D

Analysis by Zacks indicates that United Dominion Realty Trust is overvalued and is likely to underperform the market. It’s a particular “avoid” for value investors, according to Zacks.

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Illumina (ILMN)

• P/E Ratio: 99.75
• Zacks Rank: 5
• Price: $428.91
• Market Cap: $62,620,860,534
• EPS: $4.30
• VGM Score: F

Zacks slaps a “strong sell” on Illumina due to valuation measures. The stock, which rose over 15% in January alone, is in an industry that Zacks ranks in the bottom 17%, while its sector ranks in the bottom 6%.

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Vornado Realty Trust (VNO)

• P/E Ratio: 133.62
• Zacks Rank: 5
• Price: $37.39
• Market Cap: $7,151,244,934
• EPS: $0.28
• VGM Score: D

With an astronomical trailing P/E ratio of over 133, Vornado also trades at 3.75 times sales, which some analysts deem pricey for a real estate investment trust.

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AvalonBay Communities (ABV)

• P/E Ratio: 168.59
• Zacks Rank: 5
• Price: $172.22
• Market Cap: $24,043,462,150
• EPS: $1.02
• VGM Score: F

The consensus analyst rating on AvalonBay is “hold,” with an average price target of $172.27, which is below the stock’s current price. Combined with a high P/E and a “strong sell” rating from Zacks, the current upside for AvalonBay looks negligible.

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DexCom (DXCM)

• P/E Ratio: 170.16
• Zacks Rank: 4
• Price: $411.03
• Market Cap: $39,470,224,310
• EPS: $2.42
• VGM Score: C

DexCom, a manufacturer of continuous glucose monitoring systems, has had a good 2021 so far but trades at an incredibly lofty P/E ratio and an even more stratospheric price to sales multiple of 26 times.

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Regency Centers Corp (REG)

• P/E Ratio: 177.77
• Zacks Rank: 4
• Price: $49.11
• Market Cap: $8,332,989,814
• EPS: $0.28
• VGM Score: D

Regency Centers Corporation’s stock has been on a tear, up over 7% in January 2021 alone, but beyond momentum, the stock may not have much going for it at the present time. The company’s return on equity is a scant 0.8%, far below even its industry’s average of 5.5%.

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Iqvia Holdings (IQV)

• P/E Ratio: 207.24
• Zacks Rank: 4
• Price: $186.10
• Market Cap: $35,680,209,770
• EPS: $0.90
• VGM Score: B

Iqvia is a well-regarded company, and it was recently named to Fortune’s 2021 list of world’s most admired companies. However, its stock is far from a value, with a “sell” rating from Zacks and a P/E ratio of over 200. The consensus analyst price target is $173.94, about $10 per share below the stock’s current price.

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Marriott International (MAR)

• P/E Ratio: 245.95
• Zacks Rank: 4
• Price: $129.48
• Market Cap: $41,994,505,974
• EPS: $0.53
• VGM Score: D

Marriott International’s P/E ratio is astronomical, but it’s no doubt at least partially misleading. The company’s earnings have fallen off a cliff due to the COVID-19 pandemic, inflating its P/E ratio, but earnings will have to come roaring back to justify the lofty figure.

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ServiceNow Inc. (NOW)

• P/E Ratio: 1,007.64
• Zacks Rank: 4
• Price: $589.73
• Market Cap: $115,056,319,189
• EPS: $0.59
• VGM Score: C

ServiceNow has an absolutely astronomical four-digit P/E ratio. Although the company is earning money, it’s hard to justify that type of valuation for any company.

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Methodology: 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 fifty most overvalued stocks in the index in terms of (1) price to earnings ratio at market close Feb. 5, 2021. Then, GOBankingRates found (2) the Zacks Rank for each stock and identified the eleven 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 Feb. 5, 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 Feb. 5-8, 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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