Exciting developments are taking place for the stocks in this article. They’ve all surged ahead of the broader market over the last month as catalysts such as new products and positive media coverage have propelled their returns.

While momentum can be a leading indicator, it has burned many investors as it doesn’t always correlate with long-term success. On that note, here is one stock with the fundamentals to back up its performance and two not so much.

Two Momentum Stocks to Sell:

Allegro MicroSystems (ALGM)

One-Month Return: +15.4%

The result of a spinoff from Sanken in Japan, Allegro MicroSystems (NASDAQ: ALGM) is a designer of power management chips and distance sensors used in electric vehicles and data centers.

Why Do We Pass on ALGM?

1. Products and services are facing significant end-market challenges during this cycle as sales have declined by 13.7% annually over the last two years
2. Earnings per share have contracted by 16.8% annually over the last four years, a headwind for returns as stock prices often echo long-term EPS performance
3. Free cash flow margin shrank by 10.5 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive

Allegro MicroSystems is trading at $36 per share, or 72.2x forward P/E. To fully understand why you should be careful with ALGM, check out our full research report (it’s free).

Sally Beauty (SBH)

One-Month Return: +11.1%

Catering to both everyday consumers as well as salon professionals, Sally Beauty (NYSE: SBH) is a retailer that sells salon-quality beauty products such as makeup and haircare products.

Why Are We Out on SBH?

1. Recent store closures and weak same-store sales point to soft demand and an operational restructuring
2. Lagging same-store sales over the past two years suggest it might have to change its pricing and marketing strategy to stimulate demand
3. Modest revenue base of $3.70 billion gives it less fixed cost leverage and fewer distribution channels than larger companies

At $9.63 per share, Sally Beauty trades at 4.9x forward P/E. Check out our free in-depth research report to learn more about why SBH doesn’t pass our bar.

One Momentum Stock to Watch:

East West Bank (EWBC)

One-Month Return: +14%

As the largest independent bank in the U.S. focused on bridging financial services between America and Asia, East West Bancorp (NASDAQ: EWBC) operates a commercial bank that provides personal and business banking services with a unique focus on facilitating U.S.-Asia cross-border transactions.

Why Does EWBC Stand Out?

1. Market share has increased this cycle as its 14% annual net interest income growth over the last four years was exceptional
2. Performance over the past five years was turbocharged by share buybacks, which enabled its earnings per share to grow faster than its revenue
3. Annual tangible book value per share growth of 11.6% over the last five years was superb and indicates its capital strength increased during this cycle

East West Bank’s stock price of $105.53 implies a valuation ratio of 1.7x forward P/B. Is now a good time to buy? Find out in our full research report, it’s free.

Stocks We Like Even More

Market indices reached historic highs following Donald Trump’s presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth.

While this has caused many investors to adopt a "fearful" wait-and-see approach, we’re leaning into our best ideas that can grow regardless of the political or macroeconomic climate. Take advantage of Mr. Market 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-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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