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.

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. That said, here is one high-flying stock expanding its competitive advantage and two with big downside risk.

Two High-Flying Stocks to Sell:

Cognex (CGNX)

Forward P/E Ratio: 43x

Founded in 1981 when computer vision was in its infancy, Cognex (NASDAQ:CGNX) develops machine vision systems and software that help manufacturers and logistics companies automate quality inspection and tracking of products.

Why Are We Hesitant About CGNX?

1. 3.5% annual revenue growth over the last five years was slower than its business services peers
2. Earnings per share fell by 2.2% annually over the last five years while its revenue grew, showing its incremental sales were much less profitable
3. Waning returns on capital imply its previous profit engines are losing steam

Cognex’s stock price of $67.13 implies a valuation ratio of 43x forward P/E. Read our free research report to see why you should think twice about including CGNX in your portfolio.

Select Water Solutions (WTTR)

Forward P/E Ratio: 38x

Managing over 24 billion barrels of produced water annually across major U.S. shale plays, Select Water Solutions (NYSE:WTTR) provides water sourcing, recycling, disposal, and treatment services for oil and gas producers.

Why Do We Think Twice About WTTR?

1. Modest revenue base of $1.40 billion gives it less fixed cost leverage and fewer distribution channels than larger companies
2. Costly operations and weak unit economics result in an inferior gross margin of 23.5% that must be offset through higher production volumes
3. Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital

Select Water Solutions is trading at $19.16 per share, or 38x forward P/E. Dive into our free research report to see why there are better opportunities than WTTR.

One High-Flying Stock to Buy:

Badger Meter (BMI)

Forward P/E Ratio: 30.8x

The developer of the world’s first frost-proof water meter in 1905, Badger Meter (NYSE:BMI) provides water control and measure equipment to various industries.

Why Is BMI a Good Business?

1. Annual revenue growth of 15.6% over the last five years was superb and indicates its market share increased during this cycle
2. Additional sales over the last five years increased its profitability as the 20.3% annual growth in its earnings per share outpaced its revenue
3. BMI is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders, and its recently improved profitability means it has even more resources to invest or distribute

At $144.36 per share, Badger Meter trades at 30.8x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.

Stocks We Like Even More

ONE MORE THING: Top 5 Growth Stocks. The biggest stock winners almost always had one thing in common before they ran. Revenue growing like crazy. Meta. CrowdStrike. Broadcom. Our AI flagged all three. They returned 315%, 314%, and 455%, respectively.

Find out which 5 stocks it’s flagging this month — FREE. Get Our Top 5 Growth Stocks for Free HERE.

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today.