1 Surging Stock with Promising Prospects and 2 We Brush Off

The stocks in this article are all trading near their 52-week highs. This strength often reflects positive developments such as new product launches, favorable industry trends, or improved financial performance.

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 best left ignored.

Two Stocks to Sell:

Dover (DOV)

One-Month Return: +1.7%

A company that manufactured critical equipment for the United States military during World War II, Dover (NYSE:DOV) manufactures engineered components and specialized equipment for numerous industries.

Why Are We Cautious About DOV?

1. Absence of organic revenue growth over the past two years suggests it may have to lean into acquisitions to drive its expansion
2. Earnings growth over the last two years fell short of the peer group average as its EPS only increased by 4.7% annually
3. Eroding returns on capital suggest its historical profit centers are aging

Dover’s stock price of $204.72 implies a valuation ratio of 19.6x forward P/E. To fully understand why you should be careful with DOV, check out our full research report (it’s free).

Knight-Swift Transportation (KNX)

One-Month Return: +7.3%

Covering 1.6 billion loaded miles in 2023 alone, Knight-Swift Transportation (NYSE:KNX) offers less-than-truckload and full truckload delivery services.

Why Do We Avoid KNX?

1. Muted 3.7% annual revenue growth over the last two years shows its demand lagged behind its industrials peers
2. Free cash flow margin shrank by 10.8 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
3. Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results

At $57.09 per share, Knight-Swift Transportation trades at 32.9x forward P/E. Read our free research report to see why you should think twice about including KNX in your portfolio.

One Stock to Watch:

Maximus (MMS)

One-Month Return: +11.3%

With nearly 50 years of experience translating public policy into operational programs that serve millions of citizens, Maximus (NYSE:MMS) provides operational services, clinical assessments, and technology solutions to government agencies in the U.S. and internationally.

Why Are We Fans of MMS?

1. Impressive 9.4% annual revenue growth over the last five years indicates it’s winning market share this cycle
2. Revenue base of $5.43 billion gives it economies of scale and some distribution advantages
3. Share repurchases have amplified shareholder returns as its annual earnings per share growth of 34.8% exceeded its revenue gains over the last two years

Maximus is trading at $96.24 per share, or 11.8x 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

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