Exciting developments are taking place for the stocks in this article. They’ve all surged ahead of the broader market over the last month as catalysts such as new products and positive media coverage have propelled their returns.
However, not all companies with momentum are long-term winners, and many investors have lost money by following short-term trends. All that said, here are three overhyped stocks that may correct and some you should consider instead.
Advance Auto Parts (AAP)
One-Month Return: -2.8%
Founded in Virginia in 1932, Advance Auto Parts (NYSE:AAP) is an auto parts and accessories retailer that sells everything from carburetors to motor oil to car floor mats.
Why Is AAP Risky?
- Lagging same-store sales over the past two years suggest it might have to change its pricing and marketing strategy to stimulate demand
- Operating profits fell over the last year as its sales dropped and it struggled to adjust its fixed costs
- Depletion of cash reserves could lead to a fundraising event that triggers shareholder dilution
Advance Auto Parts’s stock price of $52.71 implies a valuation ratio of 24.6x forward P/E. To fully understand why you should be careful with AAP, check out our full research report (it’s free).
SolarEdge (SEDG)
One-Month Return: -4.1%
Established in 2006, SolarEdge (NASDAQ: SEDG) creates advanced systems to improve the efficiency of solar panels.
Why Do We Steer Clear of SEDG?
- Demand for its offerings was relatively low as its number of megawatts shipped has underwhelmed
- Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
- Limited cash reserves may force the company to seek unfavorable financing terms that could dilute shareholders
At $25.35 per share, SolarEdge trades at 1.3x forward price-to-sales. Check out our free in-depth research report to learn more about why SEDG doesn’t pass our bar.
Veritex Holdings (VBTX)
One-Month Return: +12.9%
Founded during the 2009 financial crisis when many banks were failing, Veritex Holdings (NASDAQGM:VBTX) operates Veritex Community Bank, providing commercial and retail banking services to small and medium-sized businesses and professionals in Texas.
Why Do We Think Twice About VBTX?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 1.1% annually over the last two years
- Estimated net interest income growth of 2.6% for the next 12 months implies demand will slow from its four-year trend
- Performance over the past two years shows each sale was less profitable as its earnings per share dropped by 12.8% annually, worse than its revenue
Veritex Holdings is trading at $30.73 per share, or 1x forward P/B. To fully understand why you should be careful with VBTX, check out our full research report (it’s free).
High-Quality Stocks for All Market Conditions
Donald Trump’s April 2025 "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 9 Market-Beating Stocks. 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.
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