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.
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 that are likely overheated and some you should look into instead.
RingCentral (RNG)
One-Month Return: -2.1%
Built on its proprietary Message Video Phone (MVP) platform that unifies multiple communication methods, RingCentral (NYSE: RNG) provides AI-driven cloud communications and collaboration solutions that enable businesses to connect through voice, video, messaging, and contact center services.
Why Should You Sell RNG?
- Offerings struggled to generate meaningful interest as its average billings growth of 3.8% over the last year did not impress
- Estimated sales growth of 4.5% for the next 12 months implies demand will slow from its two-year trend
- Customer acquisition costs take a while to recoup, making it difficult to justify sales and marketing investments that could increase revenue
RingCentral’s stock price of $35.37 implies a valuation ratio of 1.3x forward price-to-sales. To fully understand why you should be careful with RNG, check out our full research report (it’s free).
Universal Technical Institute (UTI)
One-Month Return: -0.5%
Founded in 1965, Universal Technical Institute (NYSE: UTI) is a leading provider of technical training programs, specializing in automotive, diesel, collision repair, motorcycle, and marine technicians.
Why Do We Think UTI Will Underperform?
- Sluggish trends in its new students suggest customers aren’t adopting its solutions as quickly as the company hoped
- Free cash flow margin is forecasted to shrink by 1.5 percentage points in the coming year, suggesting the company will consume more capital to keep up with its competitors
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
At $37.20 per share, Universal Technical Institute trades at 19.4x forward EV-to-EBITDA. If you’re considering UTI for your portfolio, see our FREE research report to learn more.
Ziff Davis (ZD)
One-Month Return: +48.5%
Originally a pioneering technology publisher founded in 1927 that became famous for PC Magazine, Ziff Davis (NASDAQ: ZD) operates a portfolio of digital media brands and subscription services across technology, shopping, gaming, healthcare, and cybersecurity markets.
Why Should You Dump ZD?
- Products and services are facing end-market challenges during this cycle, as seen in its flat sales over the last five years
- Performance over the past five years shows each sale was less profitable, as its earnings per share fell by 4.1% annually
- Free cash flow margin dropped by 9.3 percentage points over the last five years, implying the company became more capital intensive as competition picked up
Ziff Davis is trading at $41.59 per share, or 6.2x forward P/E. Dive into our free research report to see why there are better opportunities than ZD.
Stocks We Like More
ALSO WORTH WATCHING: Top 5 Momentum Stocks. The best time to own a great stock is when the market is finally noticing it. These aren't just high-quality businesses. Something is happening with them right now. Elite fundamentals meeting near-term momentum — both boxes checked at the same time.
Find out which stocks our AI platform is flagging this week. See this week's Strong Momentum stocks — FREE. Get Our Strong Momentum Stocks for Free HERE.
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today.
