1 Momentum Stock with Exciting Potential and 2 Facing Challenges

August 05, 2025 at 00:33 AM EDT

PEGA Cover Image

The stocks featured in this article have all approached their 52-week highs. When these price levels hit, it typically signals strong business execution, positive market sentiment, or significant industry tailwinds.

But not every company with momentum is a long-term winner, and plenty of investors have lost money betting on short-term fads. Keeping that in mind, here is one stock with lasting competitive advantages and two that may correct.

Two Stocks to Sell:

Pegasystems (PEGA)

One-Month Return: +7%

Founded by Alan Trefler in 1983, Pegasystems (NASDAQ: PEGA) offers a software-as-a-service platform to automate and optimize workflows in customer service and engagement.

Why Does PEGA Fall Short?

11.1% annual revenue growth over the last three years was slower than its software peers
Estimated sales growth of 3.6% for the next 12 months implies demand will slow from its three-year trend
Competitive market means the company must spend more on sales and marketing to stand out even if the return on investment is low

Pegasystems’s stock price of $58.51 implies a valuation ratio of 6.1x forward price-to-sales. Dive into our free research report to see why there are better opportunities than PEGA.

Orion (ORN)

One-Month Return: -20.6%

Established in 1994, Orion (NYSE: ORN) provides construction services for marine infrastructure and industrial projects.

Why Is ORN Risky?

Sales pipeline suggests its future revenue growth won’t meet our standards as its backlog averaged 1.7% declines over the past two years
Gross margin of 9.3% is below its competitors, leaving less money to invest in areas like marketing and R&D
Negative free cash flow raises questions about the return timeline for its investments

At $7.18 per share, Orion trades at 30.3x forward P/E. Read our free research report to see why you should think twice about including ORN in your portfolio.

One Stock to Watch:

Cadence (CDNS)

One-Month Return: +14.3%

With the name chosen to reflect the idea of a repeating pattern or rhythm in electronic design, Cadence Design Systems (NASDAQ: CDNS) offers a software-as-a-service platform for semiconductor engineering and design.

Why Is CDNS on Our Radar?

Billings growth has averaged 25.5% over the last year, indicating a healthy pipeline of new contracts that should drive future revenue increases
Well-designed software integrates seamlessly with other workflows, enabling swift payback periods on marketing expenses and customer growth at scale
Impressive free cash flow profitability enables the company to fund new investments or reward investors with share buybacks/dividends

Cadence is trading at $366.10 per share, or 18x forward price-to-sales. Is now a good time to buy? Find out in our full research report, it’s free.

High-Quality Stocks for All Market Conditions

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.

The smart money is already positioning for the next leg up. Don’t miss out on the recovery - check out our Top 6 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).

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