3 Overrated Stocks We Approach with Caution

Each stock in this article is trading near its 52-week high. These elevated prices usually indicate some degree of investor confidence, business improvements, or favorable market conditions.

However, not all companies with momentum are long-term winners, and many investors have lost money by following short-term trends. Keeping that in mind, here are three stocks that are likely overheated and some you should look into instead.

Boyd Gaming (BYD)

One-Month Return: +9.6%

Run by the Boyd family, Boyd Gaming (NYSE:BYD) is a diversified operator of gaming entertainment properties across the United States, offering casino games, hotel accommodations, and dining.

Why Do We Avoid BYD?

1. 4.6% annual revenue growth over the last two years was slower than its consumer discretionary peers
2. Sales are projected to tank by 11.6% over the next 12 months as demand evaporates
3. Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results

Boyd Gaming is trading at $85.74 per share, or 12.9x forward P/E. If you’re considering BYD for your portfolio, see our FREE research report to learn more.

Lincoln Educational (LINC)

One-Month Return: -2.3%

Established in 1946, Lincoln Educational (NASDAQ:LINC) is a provider of specialized technical training in the United States, offering career-oriented programs to provide practical skills required in the workforce.

Why Is LINC Risky?

1. Performance surrounding its enrolled students has lagged its peers
2. Cash-burning tendencies make us wonder if it can sustainably generate shareholder value
3. Waning returns on capital imply its previous profit engines are losing steam

At $22.51 per share, Lincoln Educational trades at 11.5x forward EV-to-EBITDA. Read our free research report to see why you should think twice about including LINC in your portfolio.

Alamo (ALG)

One-Month Return: -0.7%

Expanding its markets through acquisitions since its founding, Alamo (NSYE:ALG) designs, manufactures, and services vegetation management and infrastructure maintenance equipment for governmental, industrial, and agricultural use.

Why Should You Sell ALG?

1. Sales were flat over the last two years, indicating it’s failed to expand this cycle
2. Anticipated sales growth of 2.8% for the next year implies demand will be shaky
3. Flat earnings per share over the last two years lagged its peers

Alamo’s stock price of $216.84 implies a valuation ratio of 21.2x forward P/E. Check out our free in-depth research report to learn more about why ALG doesn’t pass our bar.

Stocks We Like More

Donald Trump’s April 2024 "Liberation Day" tariffs sent markets into a tailspin, but stocks have since rebounded strongly, proving that knee-jerk reactions often create the best buying opportunities.

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