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.
But not every company with momentum is a long-term winner, and plenty of investors have lost money betting on short-term fads. All that said, here is one stock with lasting competitive advantages and two that may correct.
Two Momentum Stocks to Sell:
Sleep Number (SNBR)
One-Month Return: +49%
Known for mattresses that can be adjusted with regards to firmness, Sleep Number (NASDAQ: SNBR) manufactures and sells its own brand of bedding products such as mattresses, bed frames, and pillows.
Why Should You Sell SNBR?
- Weak same-store sales trends over the past two years suggest there may be few opportunities in its core markets to open new locations
- Estimated sales decline of 4.6% for the next 12 months implies an even more challenging demand environment
- Short cash runway increases the probability of a capital raise that dilutes existing shareholders
Sleep Number is trading at $7.02 per share, or 1.5x forward EV-to-EBITDA. Read our free research report to see why you should think twice about including SNBR in your portfolio.
MYR Group (MYRG)
One-Month Return: +52.5%
Constructing electrical and phone lines in the American Midwest dating back to the 1890s, MYR Group (NASDAQ: MYRG) is a specialty contractor in the electrical construction industry.
Why Should You Dump MYRG?
- Sales pipeline suggests its future revenue growth likely won’t meet our standards as its backlog hasn’t budged over the past two years
- Incremental sales over the last five years were much less profitable as its earnings per share fell by 1.9% annually while its revenue grew
- Waning returns on capital imply its previous profit engines are losing steam
MYR Group’s stock price of $155.28 implies a valuation ratio of 24.8x forward P/E. Dive into our free research report to see why there are better opportunities than MYRG.
One Momentum Stock to Buy:
Duolingo (DUOL)
One-Month Return: +69%
Founded by a Carnegie Mellon computer science professor and his Ph.D. student, Duolingo (NASDAQ: DUOL) is a mobile app helping people learn new languages.
Why Should You Buy DUOL?
- Monthly Active Users have increased by an average of 39.8% annually, giving it the potential for margin-accretive growth if it can develop valuable complementary products and features
- Performance over the past three years shows its incremental sales were extremely profitable, as its annual earnings per share growth of 196% outpaced its revenue gains
- Robust free cash flow margin of 34.4% gives it many options for capital deployment, and its improved cash conversion implies it’s becoming a less capital-intensive business
At $495.55 per share, Duolingo trades at 80.2x forward EV/EBITDA. Is now a good time to buy? See for yourself in our full research report, it’s free.
Stocks We Like Even More
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 175% over the last five years.
Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Comfort Systems (+751% five-year return). Find your next big winner with StockStory today for free.
