1 Momentum Stock to Research Further and 2 We Turn Down
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. On that note, here is one stock with lasting competitive advantages and two that may correct.
Two Stocks to Sell:
MarineMax (HZO)
One-Month Return: +0.4%
Appropriately headquartered in Clearwater, Florida, MarineMax (NYSE:HZO) sells boats, yachts, and other marine products.
Why Do We Think HZO Will Underperform?
- Weak same-store sales trends over the past two years suggest there may be few opportunities in its core markets to open new locations
- Issuance of new shares over the last three years caused its earnings per share to fall by 54.7% annually, even worse than its revenue declines
At $52.33 per share, MarineMax trades at 37.5x forward P/E. To fully understand why you should be careful with HZO, check out our full research report (it’s free).
Fortrea (FTRE)
One-Month Return: +5.6%
Spun off from Labcorp in 2023 to focus exclusively on clinical research services, Fortrea (NASDAQ:FTRE) is a contract research organization that helps pharmaceutical, biotech, and medical device companies develop and bring their products to market through clinical trials and support services.
Why Do We Steer Clear of FTRE?
- Annual sales declines of 3% for the past five years show its products and services struggled to connect with the market during this cycle
- Push for growth has led to negative returns on capital, signaling value destruction, and its falling returns suggest its earlier profit pools are drying up
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
Fortrea is trading at $19.39 per share, or 21.2x forward P/E. Dive into our free research report to see why there are better opportunities than FTRE.
One Stock to Watch:
Encompass Health (EHC)
One-Month Return: -0.8%
With a network of 161 specialized facilities across 37 states and Puerto Rico, Encompass Health (NYSE:EHC) operates inpatient rehabilitation hospitals that help patients recover from strokes, hip fractures, and other debilitating conditions.
Why Are We Fans of EHC?
- Free cash flow margin jumped by 3.4 percentage points over the last five years, giving the company more resources to pursue growth initiatives, repurchase shares, or pay dividends
- Market-beating returns on capital illustrate that management has a knack for investing in profitable ventures, and its rising returns show it’s making even more lucrative bets
- Returns on capital are growing as management capitalizes on its market opportunities
Encompass Health’s stock price of $120.16 implies a valuation ratio of 19.1x forward P/E. Is now the right time to buy? See for yourself in our full research report, it’s free.
Stocks We Like Even More
WHILE YOU’RE HERE: Top 9 Market-Beating Stocks. The best stocks don’t just beat the market once. They do it again. And again. Robust revenue growth, rising free cash flow, returns on capital that leave their competition in the dust. The market has already rewarded these businesses.
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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+271% between June 2020 and June 2025). Find your next big winner with StockStory today.