Exciting developments are taking place for the stocks in this article. They’ve all surged ahead of the broader market over the last month as catalysts such as new products and positive media coverage have propelled their returns.
While momentum can be a leading indicator, it has burned many investors as it doesn’t always correlate with long-term success. On that note, here is one stock we think lives up to the hype and two that may correct.
Two momentum stocks to sell:
Qualys (QLYS)
One-month return: +31.1%
Originally developed to address the growing complexity of IT security in the cloud era, Qualys (NASDAQ: QLYS) provides a cloud-based platform that helps organizations identify, manage, and protect their IT assets from cyber threats across on-premises, cloud, and mobile environments.
Why Are We Cautious About QLYS?
- ARR growth averaged a weak 10.3% over the last year, suggesting that competition is pulling some attention away from its software
- Anticipated sales growth of 8.9% for the next year implies demand will be shaky
- Operating profits and efficiency rose over the last year as it benefited from some fixed cost leverage
Qualys is trading at $227.90 per share, or 10.3x forward price-to-sales. If you’re considering QLYS for your portfolio, see our FREE research report to learn more.
BJ's (BJ)
One-month return: +8.6%
Appealing to the budget-conscious individual shopping for a household, BJ’s Wholesale Club (NYSE: BJ) is a membership-only retail chain that sells groceries, appliances, electronics, and household items, often in bulk quantities.
Why Does BJ Worry Us?
- Large revenue base makes it harder to increase sales quickly, and its annual revenue growth of 5.5% over the last three years was below our standards for the consumer retail sector
- Widely-available products (and therefore stiff competition) result in an inferior gross margin of 18.4% that must be offset through higher volumes
- Poor expense management has led to an operating margin of 3.9% that is below the industry average
At $105.10 per share, BJ's trades at 21.9x forward P/E. Read our free research report to see why you should think twice about including BJ in your portfolio.
One momentum stock to buy:
Shopify (SHOP)
One-month return: +15.1%
Starting with just three people selling snowboards online in 2004, Shopify (NASDAQ: SHOP) provides a comprehensive platform that enables merchants of all sizes to create, manage and grow their businesses across multiple sales channels.
Why Is SHOP a Top Pick?
- Billings growth has averaged 33.1% over the last year, indicating a healthy pipeline of new contracts that should drive future revenue increases
- Revenue outlook for the upcoming 12 months is outstanding and shows it’s on track to gain market share
- Fast payback periods on sales and marketing expenses allow the company to invest heavily and onboard many customers concurrently
Shopify’s stock price of $165.72 implies a valuation ratio of 12.8x forward price-to-sales. Is now the time to initiate a position? See for yourself in our in-depth research report, it’s free.
Stocks we like even more
WHILE YOU’RE HERE: Top 9 Market-Beating Stocks. The best stocks don’t just beat the market once. They do it again. And again. Robust revenue growth, rising free cash flow, returns on capital that leave their competition in the dust. The market has already rewarded these businesses.
But our AI platform says the party isn’t over. Find out which 9 stocks made the cut this week — FREE. Get Our Top 9 Market-Beating Stocks for Free HERE.
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+1,154% between June 2020 and June 2025). Find your next big winner with StockStory today.
