Yahoo Finance

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. On that note, here are three stocks getting more buzz than they deserve and some you should buy instead.

Denny's (DENN)

One-Month Return: +26%

Open around the clock, Denny’s (NASDAQ:DENN) is a chain of diner restaurants serving breakfast and traditional American fare.

Why Do We Think DENN Will Underperform?

1. Poor same-store sales performance over the past two years indicates it’s having trouble bringing new diners into its restaurants

2. Free cash flow margin dropped by 9 percentage points over the last year, implying the company became more capital intensive as competition picked up

3. High net-debt-to-EBITDA ratio of 5× could force the company to raise capital at unfavorable terms if market conditions deteriorate

Denny’s stock price of $4.12 implies a valuation ratio of 7.8x forward P/E. To fully understand why you should be careful with DENN, check out our full research report (it’s free).

Oxford Industries (OXM)

One-Month Return: +26.3%

The parent company of Tommy Bahama, Oxford Industries (NYSE:OXM) is a lifestyle fashion conglomerate with brands that embody outdoor happiness.

Why Are We Out on OXM?

1. Poor same-store sales performance over the past two years indicates it’s having trouble bringing new shoppers into its stores

2. Projected sales decline of 1.8% for the next 12 months points to a tough demand environment ahead

3. Below-average returns on capital indicate management struggled to find compelling investment opportunities

At $57.10 per share, Oxford Industries trades at 8.4x forward P/E. Read our free research report to see why you should think twice about including OXM in your portfolio, it’s free.

Stratasys (SSYS)

One-Month Return: +24.9%

Born from the Founder’s idea of making a toy frog with a glue gun, Stratasys (NASDAQ:SSYS) offers 3D printers and related materials, software, and services to many industries.

Why Is SSYS Risky?

1. Products and services are facing significant end-market challenges during this cycle as sales have declined by 1.7% annually over the last five years

2. Performance over the past five years was negatively impacted by new share issuances as its earnings per share dropped by 13.6% annually, worse than its revenue

3. Cash-burning history makes us doubt the long-term viability of its business model