The stocks featured in this article have all approached their 52-week highs. When these price levels hit, it typically signals strong business execution, positive market sentiment, or significant industry tailwinds.
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.
Bandwidth (BAND)
One-Month Return: +41.7%
Powering communications for tech giants like Microsoft, Google, and Zoom, Bandwidth (NASDAQ: BAND) provides cloud-based communications software and APIs that enable businesses to embed voice, messaging, and emergency services into their applications and platforms.
Why Does BAND Fall Short?
- Sales trends were unexciting over the last two years as its 12% annual growth was below the typical software company
- Bad unit economics and steep infrastructure costs are reflected in its gross margin of 39.1%, one of the worst among software companies
- Static operating margin over the last year shows it couldn’t become more efficient
At $23.43 per share, Bandwidth trades at 0.8x forward price-to-sales. Check out our free in-depth research report to learn more about why BAND doesn’t pass our bar.
Callaway Golf Company (CALY)
One-Month Return: +13%
Formed between the merger of Callaway and Topgolf, Callaway Golf Company (NYSE: CALY) sells golf equipment and operates technology-driven golf entertainment venues.
Why Should You Dump CALY?
- Muted 5.3% annual revenue growth over the last five years shows its demand lagged behind its consumer discretionary peers
- Free cash flow margin is forecasted to shrink by 9.3 percentage points in the coming year, suggesting the company will consume more capital to keep up with its competitors
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
Callaway Golf Company’s stock price of $15.17 implies a valuation ratio of 31.1x forward P/E. Read our free research report to see why you should think twice about including CALY in your portfolio.
Jazz Pharmaceuticals (JAZZ)
One-Month Return: +10.9%
Originally founded in 2003 and now headquartered in Ireland following a 2012 tax inversion merger, Jazz Pharmaceuticals (NASDAQGS:JAZZ) develops and markets medicines for sleep disorders, epilepsy, and cancer, with a focus on treatments for patients with limited therapeutic options.
Why Are We Wary of JAZZ?
- 5.5% annual revenue growth over the last two years was slower than its healthcare peers
- Expenses have increased as a percentage of revenue over the last five years as its adjusted operating margin fell by 26.8 percentage points
- Earnings per share fell by 8% annually over the last five years while its revenue grew, partly because it diluted shareholders
Jazz Pharmaceuticals is trading at $202.21 per share, or 8.2x forward P/E. To fully understand why you should be careful with JAZZ, check out our full research report (it’s free).
High-Quality Stocks for All Market Conditions
ALSO WORTH WATCHING: Top 5 Momentum Stocks. The best time to own a great stock is when the market is finally noticing it. These aren't just high-quality businesses. Something is happening with them right now. Elite fundamentals meeting near-term momentum — both boxes checked at the same time.
Find out which stocks our AI platform is flagging this week. See this week's Strong Momentum stocks — FREE. Get Our Strong Momentum Stocks for Free HERE.
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.
