The stocks featured in this article are seeing some big returns. Over the past month, they’ve outpaced the market due to some combination of positive news, upbeat results, or supportive macro developments. As such, investors are taking notice and bidding up shares.
But not every company with momentum is a long-term winner, and plenty of investors have lost money betting on short-term fads. On that note, here are three stocks that are likely overheated and some you should look into instead.
Cars.com (CARS)
One-Month Return: +4.5%
Originally started as a joint venture between several media companies including The Washington Post and The New York Times, Cars.com (NYSE: CARS) is a digital marketplace that connects new and used car buyers and sellers.
Why Is CARS Not Exciting?
- Dealer Customers have stagnated over the last two years, indicating its platform may be struggling to differentiate itself from competitors
- Estimated sales growth of 2.6% for the next 12 months is soft and implies weaker demand
- Earnings per share have dipped by 2% annually over the past three years, which is concerning because stock prices follow EPS over the long term
At $12.11 per share, Cars.com trades at 3.5x forward EV/EBITDA. Dive into our free research report to see why there are better opportunities than CARS.
Penumbra (PEN)
One-Month Return: +11.8%
Founded in 2004 to address challenging medical conditions with significant unmet needs, Penumbra (NYSE: PEN) develops and manufactures innovative medical devices for treating vascular diseases and providing immersive healthcare rehabilitation solutions.
Why Does PEN Give Us Pause?
- Modest revenue base of $1.33 billion gives it less fixed cost leverage and fewer distribution channels than larger companies
- Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital
- Low returns on capital reflect management’s struggle to allocate funds effectively
Penumbra is trading at $302.50 per share, or 62.9x forward P/E. Check out our free in-depth research report to learn more about why PEN doesn’t pass our bar.
Fastly (FSLY)
One-Month Return: -11.9%
Taking its name from the core advantage it delivers to customers, Fastly (NYSE: FSLY) operates an edge cloud platform that processes, secures, and delivers web content as close to end users as possible, enabling faster digital experiences.
Why Do We Avoid FSLY?
- Struggled to drive increased usage of its software, demonstrated by its subpar 103% net revenue retention rate
- Sky-high servicing costs result in an inferior gross margin of 55% that must be offset through increased usage
- Poor expense management has led to operating margin losses
Fastly’s stock price of $10.51 implies a valuation ratio of 2.6x forward price-to-sales. If you’re considering FSLY for your portfolio, see our FREE research report to learn more.
Stocks We Like More
Your portfolio can’t afford to be based on yesterday’s story. The risk in a handful of heavily crowded stocks is rising daily.
The names generating the next wave of massive growth are right here in 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 244% over the last five years (as of June 30, 2025).
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-micro-cap company Tecnoglass (+1,754% 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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