3 Inflated Stocks with Open Questions

Great things are happening to the stocks in this article. They’re all outperforming the market over the last month because of positive catalysts such as a new product line, constructive news flow, or even a loyal Reddit fanbase.

While momentum can be a leading indicator, it has burned many investors as it doesn’t always correlate with long-term success. All that said, here are three stocks getting more buzz than they deserve and some you should buy instead.

Allison Transmission (ALSN)

One-Month Return: +12.9%

Helping build race cars at one point, Allison Transmission (NYSE:ALSN) offers transmissions to original equipment manufacturers and fleet operators.

Why Is ALSN Not Exciting?

1. Annual revenue growth of 1.5% over the last two years was below our standards for the industrials sector
2. Forecasted revenue decline of 4.7% for the upcoming 12 months implies demand will fall off a cliff
3. Earnings growth over the last two years fell short of the peer group average as its EPS only increased by 6.3% annually

At $100.81 per share, Allison Transmission trades at 14x forward P/E. Read our free research report to see why you should think twice about including ALSN in your portfolio.

Fortrea (FTRE)

One-Month Return: +40%

Spun off from Labcorp in 2023 to focus exclusively on clinical research services, Fortrea (NASDAQ:FTRE) is a contract research organization that helps pharmaceutical, biotech, and medical device companies develop and bring their products to market through clinical trials and support services.

Why Do We Pass on FTRE?

1. Annual sales declines of 2.6% for the past four years show its products and services struggled to connect with the market during this cycle
2. Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
3. 6× net-debt-to-EBITDA ratio makes lenders less willing to extend additional capital, potentially necessitating dilutive equity offerings

Fortrea is trading at $17.41 per share, or 26.2x forward P/E. To fully understand why you should be careful with FTRE, check out our full research report (it’s free for active Edge members).

Flagstar Financial (FLG)

One-Month Return: +2.6%

Tracing its roots back to 1859 and rebranded from New York Community Bancorp in 2024, Flagstar Financial (NYSE:FLG) is a bank holding company that offers commercial and consumer banking services, with specialties in multi-family lending, mortgage originations, and warehouse lending.

Why Do We Think FLG Will Underperform?

1. Products and services are facing significant end-market challenges during this cycle as sales have declined by 19.5% annually over the last two years
2. Net interest margin of 1.9% reflects its high servicing and capital costs
3. Incremental sales over the last five years were much less profitable as its earnings per share fell by 18.3% annually while its revenue grew

Flagstar Financial’s stock price of $12.73 implies a valuation ratio of 0.8x forward P/B. If you’re considering FLG for your portfolio, see our FREE research report to learn more.

Stocks We Like More

If your portfolio success hinges on just 4 stocks, your wealth is built on fragile ground. You have a small window to secure high-quality assets before the market widens and these prices disappear.

Don’t wait for the next volatility shock. 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 244% over the last five years (as of June 30, 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 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. Find your next big winner with StockStory today. Find your next big winner with StockStory today.