The stock markets in the U.S. and abroad have been struggling lately and it's time to be cautious in regards to what stocks you own or are considering purchasing. I ran a screen that searched for all stocks trading above $15/share, a market cap of at least $500 million and a PEG ratio of 3.0 yielded many results. Here are four of those stocks that I would definitely avoid.

Investopedia Broker Guides: Enhance your trading with the tools from today's top online brokers.

Lamar Advertising (Nasdaq:LAMR) provides outdoor advertising services such as billboards, posters and logo signs to local and national customers. The forward P/E ratio on LAMR is near 44.4 and the PEG ratio is around a lofty 24.6. Both valuation numbers are above average and suggest that the stock is overpriced, even as it hits a new multi-month low. The recent breakdown is likely a sign of things to come for LAMR and the entire billboard sector as a whole. With everyone's eyes fixated on computers, it would appear that the future of LAMR could be in question.

Six Flags Entertainment Corp.
(NYSE:SIX) operates theme, water and zoological parks in the U.S. The forward P/E of about 37.2 and PEG ratio around 8.6 puts the stock in the overvalued category. With gas prices high based on historical readings, the regional operator of parks could get hurt with the summer season about to begin. Technically, the stock has done well, as it sits a few points off an all-time high. That and the 5% dividend yield could make SIX attractive to some investors. However, when the valuations are taken into consideration, this stock looks like one to avoid.

SEE: Stock Picking Is Everything

EchoStar Corp
(Nasdaq:SATS) engages in the design and distribution of digital set-top boxes and related products. They work with DISH Network (Nasdaq:DISH) and Slingbox devices. The forward P/E of over 29 is not astonishing, but the PEG ratio of roughly 15.4 is a huge red flag. The stock has been in a downtrend since early February and another 10 to 20% fall would not come as a surprise, considering that there's no true support near the current price. Adding to its worries are whispers that Apple (Nasdaq:AAPL) could be making its own television model in the future.

National Grid PLC
(NYSE:NGG) owns and operates electricity and gas infrastructure networks in the U.K. and U.S. The stock has been doing well as of late, trading at a new two-year high this week. The forward P/E is low, as it is with most utilities, at about 11.1. However, the 3.1 PEG ratio is enough to scare me away from the solid chart and 4% dividend.

SEE: PEG Ratio Nails Down Value Stocks

The Bottom Line
Just because the stocks look overvalued based on fundamentals, doesn't mean it's a green light to short them. However, I do endorse either selling the shares now or avoiding entering new long positions.

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

At the time of writing, Matthew McCall did not own shares in any of the companies mentioned in this article.

Related Articles
  1. Stock Analysis

    Net Neutrality: Pros and Cons

    The fight over net neutrality has become an amazing spectacle. But at its core, it's yet another skirmish in cable television's war to remain relevant.
  2. Investing

    The Rise of Corporate Venture Capital

    After the success of Google Ventures, corporate venture capital is an increasingly popular diversification and hedging tool for many large corporations.
  3. Personal Finance

    A Day in the Life of an Equity Research Analyst

    What does an equity research analyst do on an everyday basis?
  4. Investing

    What’s Plaguing Twitter and Yelp?

    Yelp and Twitter have recently become grounded in reality and unable to justify their sky-high stock valuations.
  5. Investing

    Three Companies That Will Benefit From Online Gaming

    Certain companies stand to benefit from the increasing popularity of the online gambling industry in the U.S., as well as its expanding legalization.
  6. Mutual Funds & ETFs

    ETF Analysis: PowerShares S&P 500 Downside Hedged

    Find out about the PowerShares S&P 500 Downside Hedged ETF, and learn detailed information about characteristics, suitability and recommendations of it.
  7. Mutual Funds & ETFs

    ETF Analysis: ProShares Large Cap Core Plus

    Learn information about the ProShares Large Cap Core Plus ETF, and explore detailed analysis of its characteristics, suitability and recommendations.
  8. Mutual Funds & ETFs

    ETF Analysis: iShares Core Growth Allocation

    Find out about the iShares Core Growth Allocation Fund, and learn detailed information about its characteristics, suitability and recommendations.
  9. Mutual Funds & ETFs

    ETF Analysis: iShares MSCI USA Minimum Volatility

    Learn about the iShares MSCI USA Minimum Volatility exchange-traded fund, which invests in low-volatility equities traded on the U.S. stock market.
  10. Stock Analysis

    Should You Follow Millionaires into This Sector?

    Millionaire investors—and those who follow them—should take another look at the current economic situation before making any more investment decisions.
  1. Equity

    The value of an asset less the value of all liabilities on that ...
  2. Hard-To-Sell Asset

    An asset that is extremely difficult to dispose of either due ...
  3. Sucker Yield

    When an investor has essentially risked all of his capital for ...
  4. PT (Perseroan Terbatas)

    An acronym for Perseroan Terbatas, which is Limited Liability ...
  5. Ltd. (Limited)

    An abbreviation of "limited," Ltd. is a suffix that ...
  6. BHD (Berhad)

    The suffix Bhd. is an abbreviation of a Malay word "berhad," ...
  1. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  2. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  3. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  4. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
  5. What is the difference between issued share capital and subscribed share capital?

    The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>
  6. What happens to the shares of stock purchased in a tender offer?

    The shares of stock purchased in a tender offer become the property of the purchaser. From that point forward, the purchaser, ... Read Full Answer >>

You May Also Like

Trading Center

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!