The stocks in this article are all trading near their 52-week highs. This strength often reflects positive developments such as new product launches, favorable industry trends, or improved financial performance.
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 stocks getting more buzz than they deserve and some you should buy instead.
IPG Photonics (IPGP)
One-Month Return: +4.9%
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 Avoid IPGP?
- Sales tumbled by 4.3% annually over the last five years, showing market trends are working against its favor during this cycle
- Inability to adjust its cost structure while its revenue declined over the last five years led to a 46.1 percentage point drop in the company’s 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 $83.10 implies a valuation ratio of 69.3x forward P/E. Check out our free in-depth research report to learn more about why IPGP doesn’t pass our bar.
National Vision (EYE)
One-Month Return: -10%
Operating under multiple brands, National Vision (NYSE: EYE) sells optical products such as eyeglasses and provides optical services such as eye exams.
Why Is EYE Not Exciting?
- Reduction in its number of stores signals a focus on profitability through targeted consolidation
- Subpar operating margin of 0.6% constrains its ability to invest in process improvements or effectively respond to new competitive threats
- Underwhelming 3.6% return on capital reflects management’s difficulties in finding profitable growth opportunities, and its falling returns suggest its earlier profit pools are drying up
At $26.26 per share, National Vision trades at 33.3x forward P/E. Read our free research report to see why you should think twice about including EYE in your portfolio.
Hasbro (HAS)
One-Month Return: +1.2%
Credited with the creation of toys such as Mr. Potato Head and the Rubik’s Cube, Hasbro (NASDAQ: HAS) is a global entertainment company offering a diverse range of toys, games, and multimedia experiences for children and families.
Why Do We Steer Clear of HAS?
- Products and services have few die-hard fans as sales have declined by 3.4% annually over the last five years
- Persistent operating margin losses suggest the business manages its expenses poorly
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
Hasbro is trading at $76.74 per share, or 15.2x forward P/E. Dive into our free research report to see why there are better opportunities than HAS.
High-Quality Stocks for All Market Conditions
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