Great things are happening to the stocks in this article. They’re all outperforming the market over the last month because of positive catalysts such as a new product line, constructive news flow, or even a loyal Reddit fanbase.
But not every company with momentum is a long-term winner, and plenty of investors have lost money betting on short-term fads. All that said, here are three overhyped stocks that may correct and some you should consider instead.
The Honest Company (HNST)
One-Month Return: +6.7%
Co-founded by actress Jessica Alba, The Honest Company (NASDAQ: HNST) sells diapers and wipes, skin care products, and household cleaning products.
Why Should You Sell HNST?
- Revenue base of $383.1 million puts it at a disadvantage compared to larger competitors exhibiting economies of scale
- Capital intensity has ramped up over the last year as its free cash flow margin decreased by 13.2 percentage points
- Push for growth has led to negative returns on capital, signaling value destruction
The Honest Company’s stock price of $2.79 implies a valuation ratio of 23.6x forward P/E. To fully understand why you should be careful with HNST, check out our full research report (it’s free for active Edge members).
Crocs (CROX)
One-Month Return: +12%
Founded in 2002, Crocs (NASDAQ: CROX) sells casual footwear and is known for its iconic clog shoe.
Why Do We Think CROX Will Underperform?
- Weak constant currency growth over the past two years indicates challenges in maintaining its market share
- Free cash flow margin is forecasted to grow by 1.9 percentage points in the coming year, potentially giving the company more chips to play with
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
At $88.65 per share, Crocs trades at 7.7x forward P/E. Read our free research report to see why you should think twice about including CROX in your portfolio.
Azenta (AZTA)
One-Month Return: +15%
Serving as the guardian of some of medicine's most valuable materials, Azenta (NASDAQ: AZTA) provides biological sample management, storage, and genomic services that help pharmaceutical and biotechnology companies preserve and analyze critical research materials.
Why Should You Dump AZTA?
- Sales tumbled by 5.5% annually over the last two years, showing market trends are working against its favor during this cycle
- Sales were less profitable over the last five years as its earnings per share fell by 18.8% annually, worse than its revenue declines
- Cash burn has widened over the last five years, making us question whether it can reliably generate shareholder value
Azenta is trading at $34.52 per share, or 44x forward P/E. Check out our free in-depth research report to learn more about why AZTA doesn’t pass our bar.
High-Quality Stocks for All Market Conditions
If your portfolio success hinges on just 4 stocks, your wealth is built on fragile ground. You have a small window to secure high-quality assets before the market widens and these prices disappear.
Don’t wait for the next volatility shock. Check out our Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).
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-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.
