3 Overrated Stocks That Fall Short

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 are three stocks getting more buzz than they deserve and some you should buy instead.

Stitch Fix (SFIX)

One-Month Return: +41.9%

One of the original subscription box companies, Stitch Fix (NASDAQ:SFIX) is an online personal styling and fashion service that curates personalized clothing selections for customers.

Why Should You Sell SFIX?

1. Performance surrounding its active clients has lagged its peers
2. Performance over the past five years shows each sale was less profitable as its earnings per share dropped by 8.1% annually, worse than its revenue
3. Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value

Stitch Fix’s stock price of $5.25 implies a valuation ratio of 14.7x forward EV-to-EBITDA. Check out our free in-depth research report to learn more about why SFIX doesn’t pass our bar.

Plug Power (PLUG)

One-Month Return: +18.1%

Powering forklifts for Walmart’s distribution centers, Plug Power (NASDAQ:PLUG) provides hydrogen fuel cells used to power electric motors.

Why Do We Think PLUG Will Underperform?

1. Sales tumbled by 8.7% annually over the last two years, showing market trends are working against its favor during this cycle
2. 531.2 percentage point decline in its free cash flow margin over the last five years reflects the company’s increased investments to defend its market position
3. Depletion of cash reserves could lead to a fundraising event that triggers shareholder dilution

Plug Power is trading at $1.76 per share, or 2.1x forward price-to-sales. Dive into our free research report to see why there are better opportunities than PLUG.

West Pharmaceutical Services (WST)

One-Month Return: +18%

Founded in 1923 and serving as a critical link in the pharmaceutical supply chain, West Pharmaceutical Services (NYSE:WST) manufactures specialized packaging, containment systems, and delivery devices for injectable drugs and healthcare products.

Why Does WST Worry Us?

1. Muted 1.6% annual revenue growth over the last two years shows its demand lagged behind its healthcare peers
2. Day-to-day expenses have swelled relative to revenue over the last five years as its adjusted operating margin fell by 3.9 percentage points
3. Eroding returns on capital suggest its historical profit centers are aging

At $258.26 per share, West Pharmaceutical Services trades at 38.4x forward P/E. To fully understand why you should be careful with WST, check out our full research report (it’s free).

Stocks We Like More

Trump’s April 2025 tariff bombshell triggered a massive market selloff, but stocks have since staged an impressive recovery, leaving those who panic sold on the sidelines.

Take advantage of the rebound by checking out our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today for free.

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