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. On that note, here is one stock with the fundamentals to back up its performance and two not so much.
Two Momentum Stocks to Sell:
Bandwidth (BAND)
One-Month Return: +20.3%
Started in 1999 by David Morken who was later joined by Henry Kaestner as co-founder in 2001, Bandwidth (NASDAQ: BAND) provides thousands of customers with a software platform that uses its own global network to provide phone numbers, voice, and text connectivity.
Why Do We Steer Clear of BAND?
- Revenue increased by 13.9% annually over the last three years, acceptable on an absolute basis but tepid for a software company enjoying secular tailwinds
- Estimated sales growth of 2.6% for the next 12 months implies demand will slow from its three-year trend
- Gross margin of 38% is way below its competitors, leaving less money to invest in areas like marketing and R&D
Bandwidth is trading at $14.60 per share, or 0.6x forward price-to-sales. To fully understand why you should be careful with BAND, check out our full research report (it’s free).
Cracker Barrel (CBRL)
One-Month Return: +35.5%
Known for its country-themed food and merchandise, Cracker Barrel (NASDAQ: CBRL) is a beloved American restaurant and retail chain that celebrates the warmth and charm of Southern hospitality.
Why Do We Think CBRL Will Underperform?
- Lackluster 2.3% annual revenue growth over the last five years indicates the company is losing ground to competitors
- Earnings per share fell by 17.2% annually over the last five years while its revenue grew, showing its incremental sales were much less profitable
- High net-debt-to-EBITDA ratio of 5× could force the company to raise capital at unfavorable terms if market conditions deteriorate
Cracker Barrel’s stock price of $57.15 implies a valuation ratio of 21.2x forward P/E. If you’re considering CBRL for your portfolio, see our FREE research report to learn more.
One Momentum Stock to Buy:
Texas Roadhouse (TXRH)
One-Month Return: +15.3%
With locations often featuring Western-inspired decor, Texas Roadhouse (NASDAQ: TXRH) is an American restaurant chain specializing in Southern-style cuisine and steaks.
Why Will TXRH Beat the Market?
- Rapid rollout of new restaurants to capitalize on market opportunities makes sense given its strong same-store sales performance
- Same-store sales growth averaged 7.9% over the past two years, showing it’s bringing new and repeat diners into its restaurants
- Stellar returns on capital showcase management’s ability to surface highly profitable business ventures, and its returns are climbing as it finds even more attractive growth opportunities
At $185.08 per share, Texas Roadhouse trades at 26.7x forward P/E. Is now the right time to buy? See for yourself in our comprehensive research report, it’s free.
High-Quality Stocks for All Market Conditions
Market indices reached historic highs following Donald Trump’s presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth.
While this has caused many investors to adopt a "fearful" wait-and-see approach, we’re leaning into our best ideas that can grow regardless of the political or macroeconomic climate. Take advantage of Mr. Market by checking out 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 176% over the last five years.
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 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 for free.
