The stocks in this article are all trading near their 52-week highs. This strength often reflects positive developments such as new product launches, favorable industry trends, or improved financial performance.
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 are three stocks that are likely overheated and some you should look into instead.
Qualys (QLYS)
One-Month Return: +20.2%
Originally developed to address the growing complexity of IT security in the cloud era, Qualys (NASDAQ: QLYS) provides a cloud-based platform that helps organizations identify, manage, and protect their IT assets from cyber threats across on-premises, cloud, and mobile environments.
Why Are We Cautious About QLYS?
- Underwhelming ARR growth of 10.1% over the last year suggests the company faced challenges in acquiring and retaining long-term customers
- Estimated sales growth of 8% for the next 12 months implies demand will slow from its two-year trend
- Operating profits and efficiency rose over the last year as it benefited from some fixed cost leverage
At $153.78 per share, Qualys trades at 7.9x forward price-to-sales. Check out our free in-depth research report to learn more about why QLYS doesn’t pass our bar.
Kellanova (K)
One-Month Return: +0.6%
With Corn Flakes as its first and most iconic product, Kellanova (NYSE: K) is a packaged foods company that is dominant in the cereal and snack categories.
Why Does K Worry Us?
- Flat unit sales over the past two years imply it may need to invest in product improvements to get back on track
- Anticipated sales growth of 2.4% for the next year implies demand will be shaky
- Earnings per share fell by 3.5% annually over the last three years while its revenue was flat, partly because it diluted shareholders
Kellanova’s stock price of $83.32 implies a valuation ratio of 22.5x forward P/E. If you’re considering K for your portfolio, see our FREE research report to learn more.
Affiliated Managers Group (AMG)
One-Month Return: +8.8%
Using a partnership approach that preserves entrepreneurial culture at its portfolio companies, Affiliated Managers Group (NYSE: AMG) is an investment firm that acquires stakes in boutique asset management companies while allowing them to maintain operational independence.
Why Are We Wary of AMG?
- Annual sales declines of 1.3% for the past two years show its products and services struggled to connect with the market during this cycle
- Earnings growth over the last two years fell short of the peer group average as its EPS only increased by 7.8% annually
Affiliated Managers Group is trading at $257.65 per share, or 8.8x forward P/E. To fully understand why you should be careful with AMG, check out our full research report (it’s free for active Edge members).
Stocks We Like More
Fresh US-China trade tensions just tanked stocks—but strong bank earnings are fueling a sharp rebound. Don’t miss the bounce.
Don’t let fear keep you from great opportunities and take a look at Top 5 Growth Stocks for this month. 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-small-cap company Comfort Systems (+782% 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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