In This Article:
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.
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 are three stocks getting more buzz than they deserve and some you should buy instead.
Allient (ALNT)
One-Month Return: +58.5%
Founded in 1962, Allient (NASDAQ:ALNT) develops and manufactures precision and specialty-controlled motion components and systems.
Why Do We Steer Clear of ALNT?
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Sales tumbled by 1.7% annually over the last two years, showing market trends are working against its favor during this cycle
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Demand will likely be soft over the next 12 months as Wall Street’s estimates imply tepid growth of 3.7%
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Earnings per share decreased by more than its revenue over the last two years, partly because it diluted shareholders
Allient is trading at $32.20 per share, or 16.9x forward P/E. To fully understand why you should be careful with ALNT, check out our full research report (it’s free).
iRhythm (IRTC)
One-Month Return: +37.4%
Pioneering the shift from bulky, short-term heart monitors to sleek, wire-free patches, iRhythm Technologies (NASDAQ:IRTC) provides wearable cardiac monitoring devices and AI-powered analysis services that help physicians detect and diagnose heart rhythm disorders.
Why Is IRTC Not Exciting?
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Issuance of new shares over the last five years caused its earnings per share to fall by 5.6% annually while its revenue grew
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Cash burn makes us question whether it can achieve sustainable long-term growth
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124× net-debt-to-EBITDA ratio makes lenders less willing to extend additional capital, potentially necessitating dilutive equity offerings
iRhythm’s stock price of $135.51 implies a valuation ratio of 78.7x forward EV-to-EBITDA. Dive into our free research report to see why there are better opportunities than IRTC.
Connection (CNXN)
One-Month Return: +18.3%
Starting as a small computer products seller in 1982 and evolving into a Fortune 1000 company, Connection (NASDAQ:CNXN) is a technology solutions provider that helps businesses and government agencies design, purchase, implement, and manage their IT infrastructure and systems.
Why Do We Pass on CNXN?
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Flat sales over the last five years suggest it must find different ways to grow during this cycle
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Earnings per share lagged its peers over the last five years as they only grew by 1% annually
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Poor free cash flow margin of 2.5% for the last five years limits its freedom to invest in growth initiatives, execute share buybacks, or pay dividends