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. All that said, here are three overhyped stocks that may correct and some you should consider instead.
Freshpet (FRPT)
One-Month Return: +8.3%
Standing out from typical processed pet foods, Freshpet (NASDAQ:FRPT) is a pet food company whose product portfolio includes natural meals and treats for dogs and cats.
Why Does FRPT Worry Us?
- Revenue base of $1.08 billion puts it at a disadvantage compared to larger competitors exhibiting economies of scale
- Cash burn makes us question whether it can achieve sustainable long-term growth
- Below-average returns on capital indicate management struggled to find compelling investment opportunities
At $67.45 per share, Freshpet trades at 47.6x forward P/E. If you’re considering FRPT for your portfolio, see our FREE research report to learn more.
Kratos (KTOS)
One-Month Return: -8.9%
Established with a commitment to supporting national security, Kratos (NASDAQ:KTOS) is a provider of advanced engineering, technology, and security solutions tailored for critical national security applications.
Why Is KTOS Not Exciting?
- Free cash flow margin shrank by 9 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
- ROIC of 3.2% reflects management’s challenges in identifying attractive investment opportunities, and its decreasing returns suggest its historical profit centers are aging
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
Kratos is trading at $83.72 per share, or 129.4x forward P/E. Check out our free in-depth research report to learn more about why KTOS doesn’t pass our bar.
Redwire (RDW)
One-Month Return: -21.7%
Based in Jacksonville, Florida, Redwire (NYSE:RDW) is a provider of systems and components used in space infrastructure.
Why Do We Pass on RDW?
- Historically negative EPS is a worrisome sign for conservative investors and obscures its long-term earnings potential
- Free cash flow margin dropped by 14.8 percentage points over the last five years, implying the company became more capital intensive as competition picked up
- Depletion of cash reserves could lead to a fundraising event that triggers shareholder dilution
Redwire’s stock price of $8.33 implies a valuation ratio of 83.7x forward EV-to-EBITDA. Read our free research report to see why you should think twice about including RDW in your portfolio.
High-Quality Stocks for All Market Conditions
The market’s up big this year - but there’s a catch. Just 4 stocks account for half the S&P 500’s entire gain. That kind of concentration makes investors nervous, and for good reason. While everyone piles into the same crowded names, smart investors are hunting quality where no one’s looking - and paying a fraction of the price. Check out the high-quality names we’ve flagged in our Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).
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 Kadant (+351% five-year return). Find your next big winner with StockStory today.