Great things are happening to the stocks in this article. They’re all outperforming the market over the last month because of positive catalysts such as a new product line, constructive news flow, or even a loyal Reddit fanbase.
However, not all companies with momentum are long-term winners, and many investors have lost money by following short-term trends. Keeping that in mind, here is one stock with the fundamentals to back up its performance and two that may correct.
Two Momentum Stocks to Sell:
The Pennant Group (PNTG)
One-Month Return: +25.1%
Spun off from The Ensign Group in 2019 to focus on non-skilled nursing healthcare services, Pennant Group (NASDAQ: PNTG) operates home health, hospice, and senior living facilities across 13 western and midwestern states, serving patients of all ages including seniors.
Why Do We Think Twice About PNTG?
- Smaller revenue base of $1.02 billion means it hasn’t achieved the economies of scale that some industry juggernauts enjoy
- Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital
- 6× net-debt-to-EBITDA ratio shows it’s overleveraged and increases the probability of shareholder dilution if things turn unexpectedly
The Pennant Group is trading at $39.27 per share, or 27.5x forward P/E. Check out our free in-depth research report to learn more about why PNTG doesn’t pass our bar.
Rocket Companies (RKT)
One-Month Return: +26.2%
Born in Detroit during the 1980s and evolving into a tech-driven financial powerhouse, Rocket Companies (NYSE: RKT) is a fintech company that provides digital mortgage lending, real estate services, and personal finance solutions through its technology platform.
Why Are We Cautious About RKT?
- Annual sales declines of 14.7% for the past five years show its products and services struggled to connect with the market during this cycle
- Performance over the past five years shows each sale was less profitable as its earnings per share dropped by 39.8% annually, worse than its revenue
- Low return on equity reflects management’s struggle to allocate funds effectively
At $15.58 per share, Rocket Companies trades at 1.8x forward P/B. Read our free research report to see why you should think twice about including RKT in your portfolio.
One Momentum Stock to Watch:
e.l.f. Beauty (ELF)
One-Month Return: +45.8%
Short for "eyes, lips, face", e.l.f. Beauty (NYSE: ELF) is a developer of high-quality beauty products at accessible price points.
Why Should ELF Be on Your Watchlist?
- Remarkable 41.4% revenue growth over the last three years demonstrates its ability to capture significant market share
- Unique products and pricing power lead to a best-in-class gross margin of 71%
- Earnings per share have massively outperformed its peers over the last three years, increasing by 23.8% annually
e.l.f. Beauty’s stock price of $76.21 implies a valuation ratio of 23.2x forward P/E. Is now a good time to buy? See for yourself in our comprehensive research report, it’s free.
Stocks We Like Even More
ONE MORE THING: Top 6 Stocks for This Week. This market is separating quality stocks from expensive ones fast. AI is taking down whole sectors with no warning. In a rotation this fast, you need more than a list of good companies.
Our AI system flagged Palantir before it ran 1,662%. AppLovin before it ran 753%. Nvidia before it ran 1,178%. Each week it produces 6 new names that pass the same tests. Get Our Top 6 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.
