The stocks in this article are all trading near their 52-week highs. This strength often reflects positive developments such as new product launches, favorable industry trends, or improved financial performance.
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 we think lives up to the hype and two not so much.
Two Stocks to Sell:
Hexcel (HXL)
One-Month Return: +16.3%
Founded shortly after World War II by a group of engineers from UC Berkley, Hexcel (NYSE:HXL) manufactures lightweight composite materials primarily for the aerospace and defense sectors.
Why Are We Wary of HXL?
- Sales trends were unexciting over the last two years as its 3.7% annual growth was below the typical industrials company
- Earnings growth underperformed the sector average over the last two years as its EPS grew by just 6.4% annually
- Low returns on capital reflect management’s struggle to allocate funds effectively
Hexcel is trading at $92.50 per share, or 38x forward P/E. Check out our free in-depth research report to learn more about why HXL doesn’t pass our bar.
UL Solutions (ULS)
One-Month Return: +24.6%
Founded in 1894 as a response to the growing dangers of electricity in American homes and businesses, UL Solutions (NYSE:ULS) provides testing, inspection, and certification services that help companies ensure their products meet safety, security, and sustainability standards.
Why Are We Hesitant About ULS?
- Estimated sales growth of 4.1% for the next 12 months implies demand will slow from its two-year trend
- Expenses have increased as a percentage of revenue over the last five years as its adjusted operating margin fell by 6.1 percentage points
UL Solutions’s stock price of $104.72 implies a valuation ratio of 39.3x forward P/E. Dive into our free research report to see why there are better opportunities than ULS.
One Stock to Watch:
BrightSpring Health Services (BTSG)
One-Month Return: +19.5%
Founded in 1974, BrightSpring Health Services (NASDAQ:BTSG) offers home health care, hospice, neuro-rehabilitation, and pharmacy services.
Why Do We Watch BTSG?
- Annual revenue growth of 22.6% over the last two years was superb and indicates its market share increased during this cycle
- $13.65 billion in revenue gives its scale, which leads to bargaining power with customers because there are few trusted alternatives
- Sales outlook for the upcoming 12 months implies the business will stay on its desirable two-year growth trajectory
At $52 per share, BrightSpring Health Services trades at 30.7x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
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