The stocks featured in this article are seeing some big returns. Over the past month, they’ve outpaced the market due to new product launches, positive news, or even a dedicated social media following.
However, not all companies with momentum are long-term winners, and many investors have lost money by following short-term trends. Keeping that in mind, here are three overhyped stocks that may correct and some you should consider instead.
IPG Photonics (IPGP)
One-Month Return: +16.6%
Both a designer and manufacturer of its products, IPG Photonics (NASDAQ: IPGP) is a provider of high-performance fiber lasers used for cutting, welding, and processing raw materials.
Why Do We Think IPGP Will Underperform?
- Annual sales declines of 5.3% for the past five years show its products and services struggled to connect with the market during this cycle
- Overall productivity fell over the last five years as its plummeting sales were accompanied by a decline in its operating margin
- Earnings per share decreased by more than its revenue over the last five years, showing each sale was less profitable
IPG Photonics’s stock price of $64.23 implies a valuation ratio of 40.6x forward P/E. To fully understand why you should be careful with IPGP, check out our full research report (it’s free).
Soho House (SHCO)
One-Month Return: +14.2%
Boasting fancy locations in hubs such as NYC and Miami, Soho House (NYSE: SHCO) is a global hospitality brand offering exclusive private member clubs, hotels, and restaurants.
Why Does SHCO Fall Short?
- Number of members has disappointed over the past two years, indicating weak demand for its offerings
- Cash-burning tendencies make us wonder if it can sustainably generate shareholder value
- 16× net-debt-to-EBITDA ratio makes lenders less willing to extend additional capital, potentially necessitating dilutive equity offerings
Soho House is trading at $6.21 per share, or 6.8x forward EV-to-EBITDA. Check out our free in-depth research report to learn more about why SHCO doesn’t pass our bar.
Frontdoor (FTDR)
One-Month Return: +32.6%
Established in 2018 as a spin-off from ServiceMaster Global Holdings, Frontdoor (NASDAQ: FTDR) is a provider of home warranty and service plans.
Why Does FTDR Worry Us?
- Performance surrounding its home service plans has lagged its peers
- Free cash flow margin is forecasted to shrink by 2.4 percentage points in the coming year, suggesting the company will consume more capital to keep up with its competitors
- Waning returns on capital imply its previous profit engines are losing steam
At $53.70 per share, Frontdoor trades at 17.6x forward P/E. Read our free research report to see why you should think twice about including FTDR in your portfolio.
High-Quality Stocks for All Market Conditions
Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.
While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like 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 176% over the last five years.
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 Exlservice (+354% five-year return). Find your next big winner with StockStory today for free.
