The past year hasn't been kind to the stocks featured in this article. Each has tumbled to their lowest points in 12 months, leaving investors to decide whether they're witnessing fire sales or falling knives.
At StockStory, we dig beneath the surface of price movements to uncover whether a company's fundamentals justify its current valuation or suggest hidden potential. Keeping that in mind, here is one stock poised to prove the bears wrong and two where the outlook is warranted.
Two Stocks to Sell:
American Eagle (AEO)
One-Month Return: -18.4%
With a heavy focus on denim, American Eagle Outfitters (NYSE: AEO) is a specialty retailer offering an assortment of apparel and accessories to young adults.
Why Are We Cautious About AEO?
- Lackluster 4.3% annual revenue growth over the last six years indicates the company is losing ground to competitors
- Projected sales decline of 1.9% for the next 12 months points to a tough demand environment ahead
- Underwhelming 8.6% return on capital reflects management’s difficulties in finding profitable growth opportunities, and its decreasing returns suggest its historical profit centers are aging
American Eagle’s stock price of $9.70 implies a valuation ratio of 7.8x forward P/E. To fully understand why you should be careful with AEO, check out our full research report (it’s free).
Omnicom Group (OMC)
One-Month Return: -8.1%
With a vast network of creative agencies that helped craft some of the most memorable ad campaigns in history, Omnicom Group (NYSE: OMC) is a strategic holding company that provides advertising, marketing, and communications services to many of the world's largest companies.
Why Are We Wary of OMC?
- 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
- Estimated sales growth of 1.9% for the next 12 months implies demand will slow from its two-year trend
- Free cash flow margin shrank by 7.6 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
Omnicom Group is trading at $70.70 per share, or 8.3x forward P/E. Read our free research report to see why you should think twice about including OMC in your portfolio.
One Stock to Buy:
Sarepta Therapeutics (SRPT)
One-Month Return: -42.1%
Pioneering treatments for a devastating childhood muscle-wasting disease that primarily affects boys, Sarepta Therapeutics (NASDAQ: SRPT) develops and commercializes RNA-targeted therapies and gene therapies for rare genetic disorders, primarily Duchenne muscular dystrophy.
Why Is SRPT a Top Pick?
- Impressive 51.3% annual revenue growth over the last two years indicates it’s winning market share this cycle
- Earnings per share have massively outperformed its peers over the last five years, increasing by 38.8% annually
- Cash-burning tendencies have improved over the last five years, showing it could become financially independent one day
At $21.95 per share, Sarepta Therapeutics trades at 2.1x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
Stocks We Like Even More
The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.
While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio 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
