3 Overrated Stocks with Mounting Challenges

StockStory
Yesterday
3 Overrated Stocks with Mounting Challenges

The stocks featured in this article are seeing some big returns. Over the past month, they’ve outpaced the market due to new product launches, positive news, or even a dedicated social media following.

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.

Getty Images (GETY)

One-Month Return: +12.1%

With a vast library of over 562 million visual assets documenting everything from breaking news to iconic historical moments, Getty Images (NYSE:GETY) is a global visual content marketplace that licenses photos, videos, illustrations, and music to businesses, media outlets, and creative professionals.

Why Do We Think Twice About GETY?

  1. Sales stagnated over the last two years and signal the need for new growth strategies
  2. Free cash flow margin dropped by 6.2 percentage points over the last five years, implying the company became more capital intensive as competition picked up
  3. Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results

At $1.94 per share, Getty Images trades at 7.9x forward price-to-earnings. To fully understand why you should be careful with GETY, check out our full research report (it’s free).

Sportsman's Warehouse (SPWH)

One-Month Return: +79.3%

A go-to destination for individuals passionate about hunting, fishing, camping, hiking, shooting sports, and more, Sportsman's Warehouse (NASDAQ:SPWH) is an American specialty retailer offering a diverse range of active gear, equipment, and apparel.

Why Do We Avoid SPWH?

  1. Poor same-store sales performance over the past two years indicates it’s having trouble bringing new shoppers into its brick-and-mortar locations
  2. Persistent operating losses suggest the business manages its expenses poorly
  3. 15× net-debt-to-EBITDA ratio makes lenders less willing to extend additional capital, potentially necessitating dilutive equity offerings

Sportsman's Warehouse is trading at $1.73 per share, or 1.8x forward EV-to-EBITDA. Read our free research report to see why you should think twice about including SPWH in your portfolio, it’s free.

Limbach (LMB)

One-Month Return: +26.3%

Established in 1901, Limbach (NASDAQ: LMB) provides integrated building systems solutions, including mechanical, electrical, and plumbing services.

Why Are We Cautious About LMB?

  1. Sales tumbled by 1.3% annually over the last five years, showing market trends are working against its favor during this cycle
  2. Gross margin of 20.3% is below its competitors, leaving less money to invest in areas like marketing and R&D
  3. Operating margin of 4.6% falls short of the industry average, and the smaller profit dollars make it harder to react to unexpected market developments

Limbach’s stock price of $95 implies a valuation ratio of 30.9x forward price-to-earnings. If you’re considering LMB for your portfolio, see our FREE research report to learn more.

Stocks We Like More

The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.

While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio by checking out our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.

Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Axon (+711% five-year return). Find your next big winner with StockStory today for free.

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

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