Each stock in this article is trading near its 52-week high. These elevated prices usually indicate some degree of investor confidence, business improvements, or favorable market conditions.
While momentum can be a leading indicator, it has burned many investors as it doesn’t always correlate with long-term success. Keeping that in mind, here are three overhyped stocks that may correct and some you should consider instead.
Seagate Technology (STX)
One-Month Return: +20.1%
The developer of the original 5.25inch hard disk drive, Seagate (NASDAQ:STX) is a leading producer of data storage solutions, including hard drives and Solid State Drives (SSDs) used in PCs and data centers.
Why Are We Hesitant About STX?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 3.8% annually over the last five years
- Gross margin of 28.4% reflects its high production costs
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 8.3% for the last two years
Seagate Technology’s stock price of $131 implies a valuation ratio of 14.7x forward P/E. Read our free research report to see why you should think twice about including STX in your portfolio.
APi (APG)
One-Month Return: +4.4%
Started in 1926 as an insulation contractor, APi (NYSE:APG) provides life safety solutions and specialty services for buildings and infrastructure.
Why Are We Cautious About APG?
- Absence of organic revenue growth over the past two years suggests it may have to lean into acquisitions to drive its expansion
- Free cash flow margin shrank by 3.9 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
- Underwhelming 3% return on capital reflects management’s difficulties in finding profitable growth opportunities
APi is trading at $48.03 per share, or 23x forward P/E. If you’re considering APG for your portfolio, see our FREE research report to learn more.
Air Lease (AL)
One-Month Return: -0.5%
Established by a founder of Century City in Los Angeles, Air Lease Corporation (NYSE:AL) provides aircraft leasing and financing solutions to airlines worldwide.
Why Do We Pass on AL?
- Muted 6.4% annual revenue growth over the last five years shows its demand lagged behind its industrials peers
- 50.5 percentage point decline in its free cash flow margin over the last five years reflects the company’s increased investments to defend its market position
- Short cash runway increases the probability of a capital raise that dilutes existing shareholders
At $56.85 per share, Air Lease trades at 3.2x forward EV-to-EBITDA. Dive into our free research report to see why there are better opportunities than AL.
High-Quality Stocks for All Market Conditions
The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.
While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio by checking out our 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-micro-cap company Kadant (+351% 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