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. On that note, here is one stock with the fundamentals to back up its performance and two not so much.
Two Momentum Stocks to Sell:
Krispy Kreme (DNUT)
One-Month Return: +12.6%
Famous for its Original Glazed doughnuts and parent company of Insomnia Cookies, Krispy Kreme (NASDAQ: DNUT) is one of the most beloved and well-known fast-food chains in the world.
Why Do We Pass on DNUT?
- Falling earnings per share over the last three years has some investors worried as stock prices ultimately follow EPS over the long term
- Cash burn has widened over the last year, making us question whether it can reliably generate shareholder value
- Short cash runway increases the probability of a capital raise that dilutes existing shareholders
At $4.02 per share, Krispy Kreme trades at 5.5x forward EV-to-EBITDA. Dive into our free research report to see why there are better opportunities than DNUT.
Dine Brands (DIN)
One-Month Return: +14.8%
Operating a franchise model, Dine Brands (NYSE: DIN) is a casual restaurant chain that owns the Applebee’s and IHOP banners.
Why Is DIN Risky?
- Poor same-store sales performance over the past two years indicates it’s having trouble bringing new diners into its restaurants
- Efficiency has decreased over the last year as its operating margin fell by 4.6 percentage points
- 6× net-debt-to-EBITDA ratio makes lenders less willing to extend additional capital, potentially necessitating dilutive equity offerings
Dine Brands is trading at $28.35 per share, or 6x forward P/E. Read our free research report to see why you should think twice about including DIN in your portfolio.
One Momentum Stock to Watch:
Graham Corporation (GHM)
One-Month Return: +15.4%
Founded when its founder patented a unique design for a vacuum system used in the sugar refining process, Graham (NYSE: GHM) provides vacuum and heat transfer equipment for the energy, petrochemical, refining, and chemical sectors.
Why Is GHM Interesting?
- Backlog has averaged 21.7% growth over the past two years, showing it has a pipeline of unfulfilled orders that will support revenue in the future
- Operating profits and efficiency rose over the last five years as it benefited from some fixed cost leverage
- Incremental sales over the last two years have been highly profitable as its earnings per share increased by 145% annually, topping its revenue gains
Graham Corporation’s stock price of $60.40 implies a valuation ratio of 44x forward P/E. Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free for active Edge members .
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.
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