Exciting developments are taking place for the stocks in this article. They’ve all surged ahead of the broader market over the last month as catalysts such as new products and positive media coverage have propelled their returns.
While momentum can be a leading indicator, it has burned many investors as it doesn’t always correlate with long-term success. Keeping that in mind, here is one stock with lasting competitive advantages and two best left ignored.
Two Momentum Stocks to Sell:
Seagate Technology (STX)
One-Month Return: +38.4%
The developer of the original 5.25inch hard disk drive, Seagate (NASDAQ: STX) is a leading producer of data storage solutions, including hard drives and Solid State Drives (SSDs) used in PCs and data centers.
Why Are We Cautious About STX?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 2.8% annually over the last five years
- High input costs result in an inferior gross margin of 30.4% that must be offset through higher volumes
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 9.5% for the last two years
At $218.59 per share, Seagate Technology trades at 22.1x forward P/E. Read our free research report to see why you should think twice about including STX in your portfolio.
Methode Electronics (MEI)
One-Month Return: +22.9%
Founded in 1946, Methode Electronics (NYSE: MEI) is a global supplier of custom-engineered solutions for Original Equipment Manufacturers (OEMs).
Why Do We Avoid MEI?
- Sales tumbled by 6.8% annually over the last two years, showing market trends are working against its favor during this cycle
- Free cash flow margin dropped by 11.6 percentage points over the last five years, implying the company became more capital intensive as competition picked up
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
Methode Electronics is trading at $8.33 per share, or 208x forward P/E. Dive into our free research report to see why there are better opportunities than MEI.
One Momentum Stock to Watch:
Lyft (LYFT)
One-Month Return: +41.9%
Founded by Logan Green and John Zimmer as a long-distance intercity carpooling company Zimride, Lyft (NASDAQ: LYFT) operates a ridesharing network in the US and Canada.
Why Do We Like LYFT?
- Active Riders are rising, meaning the company can increase revenue without incurring additional customer acquisition costs if it can cross-sell additional products and features
- Additional sales over the last three years increased its profitability as the 39.2% annual growth in its earnings per share outpaced its revenue
- Free cash flow margin expanded by 23.7 percentage points over the last few years, providing additional flexibility for investments and share buybacks/dividends
Lyft’s stock price of $22.10 implies a valuation ratio of 16.4x forward EV/EBITDA. Is now the right time to buy? Find out in our full research report, it’s free.
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 6 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
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