The stocks featured in this article are seeing some big returns. Over the past month, they’ve outpaced the market due to some combination of positive news, upbeat results, or supportive macro developments. As such, investors are taking notice and bidding up shares.
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 are three stocks that are likely overheated and some you should look into instead.
onsemi (ON)
One-Month Return: +18%
Spun out of Motorola in 1999 and built through a series of acquisitions, onsemi (NASDAQ: ON) is a global provider of analog chips specializing in autos, industrial applications, and power management in cloud data centers.
Why Are We Hesitant About ON?
- Sales tumbled by 13.9% annually over the last two years, showing market trends are working against its favor during this cycle
- Demand will likely be weak over the next 12 months as Wall Street expects flat revenue
- High input costs result in an inferior gross margin of 41.2% that must be offset through higher volumes
onsemi’s stock price of $54.41 implies a valuation ratio of 19.7x forward P/E. Dive into our free research report to see why there are better opportunities than ON.
Lattice Semiconductor (LSCC)
One-Month Return: +12%
A global leader in its category, Lattice Semiconductor (NASDAQ: LSCC) is a semiconductor designer specializing in customer-programmable chips that enhance CPU performance for intensive tasks such as machine learning.
Why Do We Think Twice About LSCC?
- Annual sales declines of 18.4% for the past two years show its products and services struggled to connect with the market during this cycle
- Day-to-day expenses have swelled relative to revenue over the last five years as its operating margin fell by 18.8 percentage points
- Earnings per share lagged its peers over the last five years as they only grew by 5.5% annually
At $73.14 per share, Lattice Semiconductor trades at 52.5x forward P/E. To fully understand why you should be careful with LSCC, check out our full research report (it’s free for active Edge members).
Redwire (RDW)
One-Month Return: +30.6%
Based in Jacksonville, Florida, Redwire (NYSE: RDW) is a provider of systems and components used in space infrastructure.
Why Do We Avoid RDW?
- Historically negative EPS is a worrisome sign for conservative investors and obscures its long-term earnings potential
- Free cash flow margin shrank by 14.8 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
- Limited cash reserves may force the company to seek unfavorable financing terms that could dilute shareholders
Redwire is trading at $7.16 per share, or 55.6x 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
If your portfolio success hinges on just 4 stocks, your wealth is built on fragile ground. You have a small window to secure high-quality assets before the market widens and these prices disappear.
Don’t wait for the next volatility shock. Check out our Top 6 Stocks for this week. 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-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today.
