Each stock in this article is trading near its 52-week high. These elevated prices usually indicate some degree of investor confidence, business improvements, or favorable market conditions.
However, not all companies with momentum are long-term winners, and many investors have lost money by following short-term trends. Keeping that in mind, here are three stocks that are likely overheated and some you should look into instead.
Boyd Gaming (BYD)
One-Month Return: +9.6%
Run by the Boyd family, Boyd Gaming (NYSE: BYD) is a diversified operator of gaming entertainment properties across the United States, offering casino games, hotel accommodations, and dining.
Why Do We Avoid BYD?
- 4.6% annual revenue growth over the last two years was slower than its consumer discretionary peers
- Sales are projected to tank by 11.6% over the next 12 months as demand evaporates
- Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results
Boyd Gaming is trading at $85.74 per share, or 12.9x forward P/E. If you’re considering BYD for your portfolio, see our FREE research report to learn more.
Lincoln Educational (LINC)
One-Month Return: -2.3%
Established in 1946, Lincoln Educational (NASDAQ: LINC) is a provider of specialized technical training in the United States, offering career-oriented programs to provide practical skills required in the workforce.
Why Is LINC Risky?
- Performance surrounding its enrolled students has lagged its peers
- Cash-burning tendencies make us wonder if it can sustainably generate shareholder value
- Waning returns on capital imply its previous profit engines are losing steam
At $22.51 per share, Lincoln Educational trades at 11.5x forward EV-to-EBITDA. Read our free research report to see why you should think twice about including LINC in your portfolio.
Alamo (ALG)
One-Month Return: -0.7%
Expanding its markets through acquisitions since its founding, Alamo (NSYE:ALG) designs, manufactures, and services vegetation management and infrastructure maintenance equipment for governmental, industrial, and agricultural use.
Why Should You Sell ALG?
- Sales were flat over the last two years, indicating it’s failed to expand this cycle
- Anticipated sales growth of 2.8% for the next year implies demand will be shaky
- Flat earnings per share over the last two years lagged its peers
Alamo’s stock price of $216.84 implies a valuation ratio of 21.2x forward P/E. Check out our free in-depth research report to learn more about why ALG doesn’t pass our bar.
Stocks We Like More
Donald Trump’s April 2024 "Liberation Day" tariffs sent markets into a tailspin, but stocks have since rebounded strongly, proving that knee-jerk reactions often create the best buying opportunities.
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