The stocks featured in this article are seeing some big returns. Over the past month, they’ve outpaced the market due to some combination of positive news, upbeat results, or supportive macro developments. As such, investors are taking notice and bidding up shares.
While momentum can be a leading indicator, it has burned many investors as it doesn’t always correlate with long-term success. All that said, here are three stocks that are likely overheated and some you should look into instead.
Hanesbrands (HBI)
One-Month Return: +36.5%
A classic American staple founded in 1901, Hanesbrands (NYSE: HBI) is a clothing company known for its array of basic apparel including innerwear and activewear.
Why Do We Pass on HBI?
- Constant currency growth was below our standards over the past two years, suggesting it might need to invest in product improvements to get back on track
- Estimated sales for the next 12 months are flat and imply a softer demand environment
- Sales were less profitable over the last five years as its earnings per share fell by 18% annually, worse than its revenue declines
Hanesbrands is trading at $6.25 per share, or 11.9x forward P/E. To fully understand why you should be careful with HBI, check out our full research report (it’s free).
ICF International (ICFI)
One-Month Return: +16.3%
Operating at the intersection of policy, technology, and implementation for over five decades, ICF International (NASDAQ: ICFI) provides professional consulting services and technology solutions to government agencies and commercial clients across energy, health, environment, and security sectors.
Why Do We Avoid ICFI?
- Demand cratered as it couldn’t win new orders over the past two years, leading to an average 1.2% decline in its backlog
- Estimated sales decline of 2.3% for the next 12 months implies a challenging demand environment
- Low returns on capital reflect management’s struggle to allocate funds effectively
At $100.14 per share, ICF International trades at 14.8x forward P/E. Read our free research report to see why you should think twice about including ICFI in your portfolio.
Northrop Grumman (NOC)
One-Month Return: +4%
Responsible for the development of the first stealth bomber, Northrop Grumman (NYSE: NOC) specializes in providing aerospace, defense, and security solutions for various industry applications.
Why Do We Think NOC Will Underperform?
- Organic sales performance over the past two years indicates the company may need to make strategic adjustments or rely on M&A to catalyze faster growth
- Day-to-day expenses have swelled relative to revenue over the last five years as its operating margin fell by 5.6 percentage points
- Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability
Northrop Grumman’s stock price of $592.46 implies a valuation ratio of 20.9x forward P/E. Dive into our free research report to see why there are better opportunities than NOC.
High-Quality Stocks for All Market Conditions
Trump’s April 2025 tariff bombshell triggered a massive market selloff, but stocks have since staged an impressive recovery, leaving those who panic sold on the sidelines.
Take advantage of the rebound by checking out our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today
StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.
