3 Overrated Stocks with Warning Signs

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.

But not every company with momentum is a long-term winner, and plenty of investors have lost money betting on short-term fads. Keeping that in mind, here are three stocks that are likely overheated and some you should look into instead.

Union Pacific (UNP)

One-Month Return: +13.6%

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

Why Should You Sell UNP?

1. Sales were flat over the last two years, indicating it’s failed to expand this cycle
2. Estimated sales growth of 3.4% for the next 12 months is soft and implies weaker demand
3. Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 6.8 percentage points

Union Pacific is trading at $264.21 per share, or 21.2x forward P/E. To fully understand why you should be careful with UNP, check out our full research report (it’s free).

AT&T (T)

One-Month Return: +19.5%

Founded by Alexander Graham Bell, AT&T (NYSE:T) is a multinational telecomm conglomerate providing a range of communications and internet services.

Why Do We Think T Will Underperform?

1. Products and services fail to spark excitement with consumers, as seen in its flat sales over the last five years
2. Earnings per share fell by 7.9% annually over the last five years while its revenue was flat, showing each sale was less profitable
3. Projected 1.3 percentage point decline in its free cash flow margin next year reflects the company’s plans to increase its investments to defend its market position

AT&T’s stock price of $27.50 implies a valuation ratio of 12.1x forward P/E. Check out our free in-depth research report to learn more about why T doesn’t pass our bar.

Clear Channel Outdoor (CCO)

One-Month Return: +17.4%

With thousands of digital and traditional displays lighting up America's highways, city streets, and airports, Clear Channel Outdoor (NYSE:CCO) operates billboards, street furniture, and airport displays, connecting advertisers with millions of consumers across the US.

Why Does CCO Worry Us?

1. Sales tumbled by 2.9% annually over the last five years, showing market trends are working against its favor during this cycle
2. Cash burn makes us question whether it can achieve sustainable long-term growth
3. 12× net-debt-to-EBITDA ratio shows it’s overleveraged and increases the probability of shareholder dilution if things turn unexpectedly

At $2.38 per share, Clear Channel Outdoor trades at 14.1x forward EV-to-EBITDA. If you’re considering CCO 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-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today.