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3 Inflated Stocks We’re Skeptical Of

AEO Cover Image

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.

While momentum can be a leading indicator, it has burned many investors as it doesn’t always correlate with long-term success. All that said, here are three overhyped stocks that may correct and some you should consider instead.

American Eagle (AEO)

One-Month Return: +29.1%

With a heavy focus on denim, American Eagle Outfitters (NYSE: AEO) is a specialty retailer offering an assortment of apparel and accessories to young adults.

Why Are We Hesitant About AEO?

  1. Muted 4.3% annual revenue growth over the last six years shows its demand lagged behind its consumer retail peers
  2. Forecasted revenue decline of 2% for the upcoming 12 months implies demand will fall off a cliff
  3. Low returns on capital reflect management’s struggle to allocate funds effectively, and its shrinking returns suggest its past profit sources are losing steam

American Eagle’s stock price of $12.79 implies a valuation ratio of 10.3x forward P/E. If you’re considering AEO for your portfolio, see our FREE research report to learn more.

Bel Fuse (BELFA)

One-Month Return: +29.1%

Founded by 26-year-old Elliot Bernstein during the electronics boom after WW2, Bel Fuse (NASDAQ: BELF.A) provides electronic systems and devices to the telecommunications, networking, transportation, and industrial sectors.

Why Does BELFA Give Us Pause?

  1. Annual sales declines of 7.1% for the past two years show its products and services struggled to connect with the market during this cycle
  2. Falling earnings per share over the last two years has some investors worried as stock prices ultimately follow EPS over the long term

At $116.74 per share, Bel Fuse trades at 11.9x forward EV-to-EBITDA. Check out our free in-depth research report to learn more about why BELFA doesn’t pass our bar.

Ameresco (AMRC)

One-Month Return: +27.6%

Having played a role in upgrading the energy solutions of Alcatraz Island, Ameresco (NYSE: AMRC) provides energy and renewable energy solutions for various sectors.

Why Does AMRC Fall Short?

  1. Gross margin of 16.5% is below its competitors, leaving less money to invest in areas like marketing and R&D
  2. Cash-burning tendencies make us wonder if it can sustainably generate shareholder value
  3. Short cash runway increases the probability of a capital raise that dilutes existing shareholders

Ameresco is trading at $20.50 per share, or 18.4x forward P/E. To fully understand why you should be careful with AMRC, check out our full research report (it’s free).

High-Quality Stocks for All Market Conditions

When Trump unveiled his aggressive tariff plan in April 2024, markets tanked as investors feared a full-blown trade war. But those who panicked and sold missed the subsequent rebound that’s already erased most losses.

Don’t let fear keep you from great opportunities and take a look at Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).

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