Great things are happening to the stocks in this article. They’re all outperforming the market over the last month because of positive catalysts such as a new product line, constructive news flow, or even a loyal Reddit fanbase.
But not every company with momentum is a long-term winner, and plenty of investors have lost money betting on short-term fads. On that note, here are three stocks getting more buzz than they deserve and some you should buy instead.
One-Month Return: +19.5%
Known for the clever “Twilio Magic” demo that had developers creating functioning communications apps in minutes, Twilio (NYSE:TWLO) provides a platform that enables businesses to communicate with their customers through voice, messaging, email, and other digital channels.
Why Are We Hesitant About TWLO?
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Average billings growth of 13.5% over the last year was subpar, suggesting it struggled to push its software and might have to lower prices to stimulate demand
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Anticipated sales growth of 9.3% for the next year implies demand will be shaky
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Gross margin of 49.4% is way below its competitors, leaving less money to invest in areas like marketing and R&D
Twilio is trading at $128.47 per share, or 3.8x forward price-to-sales. If you’re considering TWLO for your portfolio, see our FREE research report to learn more.
One-Month Return: +31.4%
Known by many for its old cable television commercials, WeightWatchers (NASDAQ:WW) is a wellness company offering a range of products and services promoting weight loss and healthy habits.
Why Are We Cautious About WW?
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Performance surrounding its members has lagged its peers
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Poor free cash flow margin of -0.8% for the last two years limits its freedom to invest in growth initiatives, execute share buybacks, or pay dividends
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Eroding returns on capital suggest its historical profit centers are aging
WeightWatchers’s stock price of $34.32 implies a valuation ratio of 15.7x forward P/E. Read our free research report to see why you should think twice about including WW in your portfolio, it’s free for active Edge members.
One-Month Return: +20.9%
Hillenbrand, Inc. (NYSE: HI) is an industrial company that designs, manufactures, and sells highly engineered processing equipment and solutions for various industries.
Why Should You Dump HI?
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3.5% annual revenue growth over the last two years was slower than its industrials peers
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Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 18.9 percentage points
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Waning returns on capital imply its previous profit engines are losing steam
