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.
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 overhyped stocks that may correct and some you should consider instead.
American Eagle (AEO)
One-Month Return: +29.1%
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 Hesitant About AEO?
- Muted 4.3% annual revenue growth over the last six years shows its demand lagged behind its consumer retail peers
- Forecasted revenue decline of 2% for the upcoming 12 months implies demand will fall off a cliff
- Low returns on capital reflect management’s struggle to allocate funds effectively, and its shrinking returns suggest its past profit sources are losing steam
American Eagle’s stock price of $12.79 implies a valuation ratio of 10.3x forward P/E. If you’re considering AEO for your portfolio, see our FREE research report to learn more.
Bel Fuse (BELFA)
One-Month Return: +29.1%
Founded by 26-year-old Elliot Bernstein during the electronics boom after WW2, Bel Fuse (NASDAQ: BELF.A) provides electronic systems and devices to the telecommunications, networking, transportation, and industrial sectors.
Why Does BELFA Give Us Pause?
- Annual sales declines of 7.1% for the past two years show its products and services struggled to connect with the market during this cycle
- Falling earnings per share over the last two years has some investors worried as stock prices ultimately follow EPS over the long term
At $116.74 per share, Bel Fuse trades at 11.9x forward EV-to-EBITDA. Check out our free in-depth research report to learn more about why BELFA doesn’t pass our bar.
Ameresco (AMRC)
One-Month Return: +27.6%
Having played a role in upgrading the energy solutions of Alcatraz Island, Ameresco (NYSE: AMRC) provides energy and renewable energy solutions for various sectors.
Why Does AMRC Fall Short?
- Gross margin of 16.5% is below its competitors, leaving less money to invest in areas like marketing and R&D
- Cash-burning tendencies make us wonder if it can sustainably generate shareholder value
- Short cash runway increases the probability of a capital raise that dilutes existing shareholders
Ameresco is trading at $20.50 per share, or 18.4x forward P/E. To fully understand why you should be careful with AMRC, check out our full research report (it’s free).
High-Quality Stocks for All Market Conditions
When Trump unveiled his aggressive tariff plan in April 2024, markets tanked as investors feared a full-blown trade war. But those who panicked and sold missed the subsequent rebound that’s already erased most losses.
Don’t let fear keep you from great opportunities and take a look at Top 9 Market-Beating Stocks. 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-micro-cap company Kadant (+351% 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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