3 Inflated Stocks with Questionable Fundamentals

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. Keeping that in mind, here are three stocks that are likely overheated and some you should look into instead.

Penguin Solutions (PENG)

One-Month Return: +23.5%

Based in the US, Penguin Solutions (NASDAQ:PENG) is a diversified semiconductor company offering memory, digital, and LED products.

Why Should You Sell PENG?

1. Customers postponed purchases of its products and services this cycle as its revenue declined by 5% annually over the last two years
2. Responsiveness to unforeseen market trends is restricted due to its substandard operating margin profitability
3. Underwhelming 5% return on capital reflects management’s difficulties in finding profitable growth opportunities, and its falling returns suggest its earlier profit pools are drying up

Penguin Solutions’s stock price of $24.47 implies a valuation ratio of 14.5x forward P/E. Check out our free in-depth research report to learn more about why PENG doesn’t pass our bar.

Kohl's (KSS)

One-Month Return: +38%

Founded as a corner grocery store in Milwaukee, Wisconsin, Kohl’s (NYSE:KSS) is a department store chain that sells clothing, cosmetics, electronics, and home goods.

Why Do We Steer Clear of KSS?

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. Sales are projected to tank by 5.2% over the next 12 months as its demand continues evaporating
3. 6× net-debt-to-EBITDA ratio shows it’s overleveraged and increases the probability of shareholder dilution if things turn unexpectedly

Kohl's is trading at $11.70 per share, or 44.4x forward P/E. Read our free research report to see why you should think twice about including KSS in your portfolio.

Figs (FIGS)

One-Month Return: +16.1%

Rising to fame via TikTok and founded in 2013 by Heather Hasson and Trina Spear, Figs (NYSE:FIGS) is a healthcare apparel company known for its stylish approach to medical attire and uniforms.

Why Are We Cautious About FIGS?

1. Demand for its offerings was relatively low as its number of active customers has underwhelmed
2. Earnings per share have dipped annually over the past three years, which is concerning because stock prices follow EPS over the long term
3. Negative returns on capital show management lost money while trying to expand the business

At $6.55 per share, Figs trades at 87x forward P/E. To fully understand why you should be careful with FIGS, check out our full research report (it’s free).

High-Quality Stocks for All Market Conditions

When Trump unveiled his aggressive tariff plan in April 2024, markets tanked as investors feared a full-blown trade war. But those who panicked and sold missed the subsequent rebound that’s already erased most losses.

Don’t let fear keep you from great opportunities and take a look at Top 5 Growth Stocks for this month. 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-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today for free.

StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.