1 Momentum Stock for Long-Term Investors and 2 Facing Challenges

The stocks featured in this article are seeing some big returns. Over the past month, they’ve outpaced the market due to some combination of positive news, upbeat results, or supportive macro developments. As such, investors are taking notice and bidding up shares.

While momentum can be a leading indicator, it has burned many investors as it doesn’t always correlate with long-term success. Keeping that in mind, here is one stock with lasting competitive advantages and two not so much.

Two Momentum Stocks to Sell:

Shoals (SHLS)

One-Month Return: +29.5%

Started in Huntsville, Alabama, Shoals (NASDAQ:SHLS) designs and manufactures products that make solar energy systems work more efficiently.

Why Is SHLS Risky?

1. Average backlog growth of 3.3% over the past two years was mediocre and suggests fewer customers signed long-term contracts
2. 5.8 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. Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions

Shoals’s stock price of $6.72 implies a valuation ratio of 15.5x forward P/E. Dive into our free research report to see why there are better opportunities than SHLS.

Myriad Genetics (MYGN)

One-Month Return: +22.9%

Founded in 1991 as one of the pioneers in translating genetic discoveries into clinical applications, Myriad Genetics (NASDAQ:MYGN) develops genetic tests that assess disease risk, guide treatment decisions, and provide insights across oncology, women's health, and mental health.

Why Do We Think MYGN Will Underperform?

1. Sales trends were unexciting over the last five years as its 5.5% annual growth was below the typical healthcare company
2. Negative returns on capital show that some of its growth strategies have backfired, and its falling returns suggest its earlier profit pools are drying up
3. Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value

Myriad Genetics is trading at $7.02 per share, or 82.8x forward P/E. Read our free research report to see why you should think twice about including MYGN in your portfolio.

One Momentum Stock to Watch:

IMAX (IMAX)

One-Month Return: +26.9%

Originally developed for World Expo '67 in Montreal as an innovative projection system, IMAX (NYSE:IMAX) provides proprietary large-format cinema technology and systems that deliver immersive movie experiences with enhanced image quality and sound.

Why Does IMAX Stand Out?

1. Additional sales over the last two years increased its profitability as the 34.3% annual growth in its earnings per share outpaced its revenue
2. Free cash flow margin jumped by 26.4 percentage points over the last five years, giving the company more resources to pursue growth initiatives, repurchase shares, or pay dividends
3. Returns on capital are increasing as management’s prior bets are starting to bear fruit

At $32.10 per share, IMAX trades at 25.2x forward P/E. Is now the right time to buy? See for yourself in our in-depth research report, it’s free.

High-Quality Stocks for All Market Conditions

Donald Trump’s April 2025 "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.

The smart money is already positioning for the next leg up. Don’t miss out on the recovery - check 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 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. Find your next big winner with StockStory today. Find your next big winner with StockStory today

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