Great things are happening to the stocks in this article. They’re all outperforming the market over the last month because of positive catalysts such as a new product line, constructive news flow, or even a loyal Reddit fanbase.
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 is one stock with lasting competitive advantages and two not so much.
Two Momentum Stocks to Sell:
Stitch Fix (SFIX)
One-Month Return: +34.8%
One of the original subscription box companies, Stitch Fix (NASDAQ: SFIX) is an online personal styling and fashion service that curates personalized clothing selections for customers.
Why Is SFIX Risky?
- Number of active clients has disappointed over the past two years, indicating weak demand for its offerings
- Poor expense management has led to operating losses
- Performance over the past five years shows each sale was less profitable as its earnings per share dropped by 23.9% annually, worse than its revenue
At $4.11 per share, Stitch Fix trades at 14.5x forward EV-to-EBITDA. If you’re considering SFIX for your portfolio, see our FREE research report to learn more.
Envista (NVST)
One-Month Return: +9.7%
Uniting more than 30 trusted brands including Nobel Biocare, Ormco, and DEXIS under one corporate umbrella, Envista Holdings (NYSE: NVST) is a global dental products company that provides equipment, consumables, and specialized technologies for dental professionals.
Why Should You Sell NVST?
- Underwhelming constant currency revenue performance over the past two years suggests its product offering at current prices doesn’t resonate with customers
- Earnings per share fell by 13.9% annually over the last five years while its revenue was flat, showing each sale was less profitable
- Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
Envista’s stock price of $16.64 implies a valuation ratio of 16.3x forward P/E. Read our free research report to see why you should think twice about including NVST in your portfolio.
One Momentum Stock to Watch:
Freshworks (FRSH)
One-Month Return: +17.6%
Founded in Chennai, India in 2010 with the idea of creating a “fresh” helpdesk product, Freshworks (NASDAQ: FRSH) offers a broad range of software targeted at small and medium-sized businesses.
Why Are We Positive On FRSH?
- Customers view its software as mission-critical to their operations as its ARR has averaged 20.2% growth over the last year
- Superior software functionality and low servicing costs lead to a top-tier gross margin of 84.4%
- Operating margin expanded by 9.2 percentage points over the last year as it scaled and became more efficient
Freshworks is trading at $14.36 per share, or 5.2x forward price-to-sales. Is now the time to initiate a position? 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 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.
