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.
However, not all companies with momentum are long-term winners, and many investors have lost money by following short-term trends. All that said, here are three overhyped stocks that may correct and some you should consider instead.
Hyster-Yale Materials Handling (HY)
One-Month Return: +23.6%
Playing a significant role in the development of the hydraulic lift truck, Hyster-Yale (NYSE: HY) designs, manufactures, and sells materials handling equipment to various sectors.
Why Is HY Risky?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 4.3% annually over the last two years
- Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital
- 12× net-debt-to-EBITDA ratio makes lenders less willing to extend additional capital, potentially necessitating dilutive equity offerings
Hyster-Yale Materials Handling is trading at $39.30 per share, or 19.9x forward EV-to-EBITDA. If you’re considering HY for your portfolio, see our FREE research report to learn more.
Matrix Service (MTRX)
One-Month Return: +16.7%
Founded in Oklahoma, Matrix Service (NASDAQ: MTRX) provides engineering, fabrication, construction, and maintenance services primarily to the energy and industrial markets.
Why Is MTRX Not Exciting?
- Muted 1.1% annual revenue growth over the last five years shows its demand lagged behind its industrials peers
- High input costs result in an inferior gross margin of 3.7% that must be offset through higher volumes
- Issuance of new shares over the last five years caused its earnings per share to fall by 21.4% annually while its revenue grew
At $12.95 per share, Matrix Service trades at 19.5x forward P/E. Check out our free in-depth research report to learn more about why MTRX doesn’t pass our bar.
Applied Digital (APLD)
One-Month Return: +55.8%
Pivoting from its origins in cryptocurrency mining to become a key player in the AI infrastructure boom, Applied Digital (NASDAQ: APLD) designs and operates specialized data centers that provide high-performance computing infrastructure for artificial intelligence and blockchain applications.
Why Does APLD Worry Us?
- Earnings per share fell by 3.7% annually over the last four years while its revenue grew, partly because it diluted shareholders
- Negative free cash flow raises questions about the return timeline for its investments
- Unfavorable liquidity position could lead to additional equity financing that dilutes shareholders
Applied Digital’s stock price of $32 implies a valuation ratio of 42.7x forward EV-to-EBITDA. To fully understand why you should be careful with APLD, check out our full research report (it’s free).
High-Quality Stocks for All Market Conditions
ALSO WORTH WATCHING: Top 5 Momentum Stocks. The best time to own a great stock is when the market is finally noticing it. These aren't just high-quality businesses. Something is happening with them right now. Elite fundamentals meeting near-term momentum — both boxes checked at the same time.
Find out which stocks our AI platform is flagging this week. See this week's Strong Momentum stocks — FREE. Get Our Strong Momentum Stocks for Free HERE.
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 Exlservice (+354% five-year return). Find your next big winner with StockStory today.
