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. Keeping that in mind, here is one stock we think lives up to the hype and two best left ignored.
Two Momentum Stocks to Sell:
Target Hospitality (TH)
One-Month Return: +49%
Building mini-communities at places such as oil drilling sites, Target Hospitality (NASDAQ: TH) is a provider of specialty workforce lodging accommodations and services.
Why Is TH Risky?
- Lackluster 7.3% annual revenue growth over the last five years indicates the company is losing ground to competitors
- Earnings per share fell by 3.7% annually over the last five years while its revenue grew, showing its incremental sales were much less profitable
- Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results
At $14.28 per share, Target Hospitality trades at 20x forward EV-to-EBITDA. Read our free research report to see why you should think twice about including TH in your portfolio.
Caterpillar (CAT)
One-Month Return: +16.9%
With its iconic yellow machinery working on construction sites, Caterpillar (NYSE: CAT) manufactures construction equipment like bulldozers, excavators, and parts and maintenance services.
Why Does CAT Give Us Pause?
- Flat sales over the last two years suggest it must find different ways to grow during this cycle
- High input costs result in an inferior gross margin of 29.2% that must be offset through higher volumes
- Earnings per share have contracted by 5.2% annually over the last two years, a headwind for returns as stock prices often echo long-term EPS performance
Caterpillar is trading at $837.85 per share, or 35.1x forward P/E. If you’re considering CAT for your portfolio, see our FREE research report to learn more.
One Momentum Stock to Watch:
Coherent (COHR)
One-Month Return: +25.9%
Created through the 2022 rebranding of II-VI Incorporated, a company with roots dating back to 1971, Coherent (NYSE: COHR) develops and manufactures advanced materials, lasers, and optical components for applications ranging from telecommunications to industrial manufacturing.
Why Is COHR on Our Radar?
- Annual revenue growth of 16.6% over the past two years was outstanding, reflecting market share gains this cycle
- Projected revenue growth of 25.9% for the next 12 months is above its two-year trend, pointing to accelerating demand
- Earnings growth has massively outpaced its peers over the last two years as its EPS has compounded at 69.9% annually
Coherent’s stock price of $343.00 implies a valuation ratio of 54.3x forward P/E. Is now a good time to buy? See for yourself in our in-depth 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.
But our AI platform says the party isn't over. Find out which 9 stocks made the cut this week — FREE. Get Our Top 9 Market-Beating 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-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today.
