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Exciting developments are taking place for the stocks in this article. They’ve all surged ahead of the broader market over the last month as catalysts such as new products and positive media coverage have propelled their returns.

However, not all companies with momentum are long-term winners, and many investors have lost money by following short-term trends. All that said, here is one stock with the fundamentals to back up its performance and two that may correct.

Two Momentum Stocks to Sell:

BlackLine (BL)

One-Month Return: +15.5%

Started in 2001 by software engineer Therese Tucker, one of the very few women founders who took their companies public, BlackLine (NASDAQ:BL) provides software for organizations to automate accounting and finance tasks.

Why Does BL Give Us Pause?

1. Products, pricing, or go-to-market strategy may need some adjustments as its 7.4% average billings growth over the last year was weak

2. Estimated sales growth of 7.5% for the next 12 months implies demand will slow from its three-year trend

3. Expenses have increased as a percentage of revenue over the last year as its operating margin fell by 2.1 percentage points

BlackLine’s stock price of $53.20 implies a valuation ratio of 4.8x forward price-to-sales. If you’re considering BL for your portfolio, see our FREE research report to learn more.

Kura Sushi (KRUS)

One-Month Return: +22.3%

Known for its conveyor belt that transports dishes to diners, Kura Sushi (NASDAQ:KRUS) is a chain of sushi restaurants serving traditional Japanese fare with a touch of modernity and technology.

Why Do We Avoid KRUS?

1. Modest revenue base of $258.4 million gives it less fixed cost leverage and fewer distribution channels than larger companies

2. Day-to-day expenses have swelled relative to revenue over the last year as its operating margin fell by 4.6 percentage points

3. Cash-burning history makes us doubt the long-term viability of its business model

Kura Sushi is trading at $63.50 per share, or 943.6x forward P/E. Check out our free in-depth research report to learn more about why KRUS doesn’t pass our bar.

One Momentum Stock to Watch:

Watts Water Technologies (WTS)

One-Month Return: +20.9%

Founded in 1874, Watts Water (NYSE:WTS) specializes in manufacturing water products and systems for residential, commercial, and industrial applications globally.

Why Should WTS Be on Your Watchlist?

1. Offerings are mission-critical for businesses and lead to a stellar gross margin of 45%

2. Operating profits and efficiency rose over the last five years as it benefited from some fixed cost leverage

3. Performance over the past five years was turbocharged by share buybacks, which enabled its earnings per share to grow faster than its revenue