1 Oversold Stock Set for a Comeback and 2 to Avoid

The past year hasn't been kind to the stocks featured in this article. Each has tumbled to their lowest points in 12 months, leaving investors to decide whether they're witnessing fire sales or falling knives.

Price charts only tell part of the story. Our team at StockStory evaluates each company's underlying fundamentals to separate temporary setbacks from structural declines. That said, here is one stock poised to prove the bears wrong and two where the skepticism is well-placed.

Two Stocks to Sell:

Best Buy (BBY)

One-Month Return: -17.6%

With humble beginnings as a stereo equipment seller, Best Buy (NYSE:BBY) now sells a broad selection of consumer electronics, appliances, and home office products.

Why Is BBY Not Exciting?

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. Gross margin of 22.3% is below its competitors, leaving less money for marketing and promotions
3. Subpar operating margin of 3.3% constrains its ability to invest in process improvements or effectively respond to new competitive threats

At $60.81 per share, Best Buy trades at 9.2x forward price-to-earnings. Check out our free in-depth research report to learn more about why BBY doesn’t pass our bar.

Union Pacific (UNP)

One-Month Return: -7.2%

Part of the transcontinental railroad project, Union Pacific (NYSE:UNP) is a freight transportation company that operates a major railroad network.

Why Do We Steer Clear of UNP?

1. Disappointing unit sales over the past two years imply it may need to invest in improvements to get back on track
2. Earnings per share have dipped by 1.2% annually over the past two years, which is concerning because stock prices follow EPS over the long term
3. Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 5 percentage points

Union Pacific’s stock price of $220.66 implies a valuation ratio of 18.2x forward price-to-earnings. To fully understand why you should be careful with UNP, check out our full research report (it’s free).

One Stock to Buy:

Datadog (DDOG)

One-Month Return: -12.9%

Named after a database the founders had to painstakingly look after at their previous company, Datadog (NASDAQ:DDOG) is a software-as-a-service platform that makes it easier to monitor cloud infrastructure and applications.

Why Is DDOG a Good Business?

1. ARR trends over the last year show it’s maintaining a steady flow of long-term contracts that contribute positively to its revenue predictability
2. Software platform has product-market fit given the rapid recovery of its customer acquisition costs
3. Impressive free cash flow profitability enables the company to fund new investments or reward investors with share buybacks/dividends

Datadog is trading at $90.55 per share, or 10.5x forward price-to-sales. Is now the right time to buy? See for yourself in our full research report, it’s free.

Stocks We Like Even More

Market indices reached historic highs following Donald Trump’s presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth.

While this has caused many investors to adopt a "fearful" wait-and-see approach, we’re leaning into our best ideas that can grow regardless of the political or macroeconomic climate. Take advantage of Mr. Market 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 Sterling Infrastructure (+1,096% five-year return). Find your next big winner with StockStory today for free.