In This Article:
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?
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Weak same-store sales trends over the past two years suggest there may be few opportunities in its core markets to open new locations
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Estimated sales decline of 4.6% for the next 12 months implies an even more challenging demand environment
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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. Check out our free in-depth research report to learn more about why SNBR doesn’t pass our bar.
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?
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Sales pipeline suggests its future revenue growth likely won’t meet our standards as its backlog hasn’t budged over the past two years
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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
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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?
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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
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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
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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