The stocks featured in this article are seeing some big returns. Over the past month, they’ve outpaced the market due to new product launches, positive news, or even a dedicated social media following.

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 are three stocks that are likely overheated and some you should look into instead.

Wayfair (W)

One-Month Return: +40.8%

Founded in 2002 by Niraj Shah, Wayfair (NYSE: W) is a leading online retailer of mass-market home goods in the US, UK, Canada, and Germany.

Why Is W Risky?

1. Struggled with new customer acquisition as its active customers averaged 1.7% declines
2. Lackluster growth in its average revenue per buyer coupled with its weaker engagement trends led to sluggish demand over the last two years
3. High servicing costs result in an inferior gross margin of 30.3% that must be offset through higher volumes

Wayfair is trading at $78.76 per share, or 19.4x forward EV/EBITDA. To fully understand why you should be careful with W, check out our full research report (it’s free).

Wolverine Worldwide (WWW)

One-Month Return: +49.4%

Founded in 1883, Wolverine Worldwide (NYSE: WWW) is a global footwear company with a diverse portfolio of brands including Merrell, Hush Puppies, and Saucony.

Why Are We Out on WWW?

1. Products and services have few die-hard fans as sales have declined by 1.6% annually over the last five years
2. Performance over the past five years shows each sale was less profitable as its earnings per share dropped by 5.3% annually, worse than its revenue
3. Negative returns on capital show management lost money while trying to expand the business, and its falling returns suggest its earlier profit pools are drying up

At $28.88 per share, Wolverine Worldwide trades at 22.7x forward P/E. Dive into our free research report to see why there are better opportunities than WWW.

Compass (COMP)

One-Month Return: +33%

Fueled by its mission to replace the "paper-driven, antiquated workflow" of buying a house, Compass (NYSE: COMP) is a digital-first company operating a residential real estate brokerage in the United States.

Why Are We Cautious About COMP?

1. Performance surrounding its principal agents has lagged its peers
2. Persistent operating margin losses suggest the business manages its expenses poorly
3. Low free cash flow margin of 1.4% for the last two years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders

Compass’s stock price of $8.87 implies a valuation ratio of 19.9x forward P/E. Check out our free in-depth research report to learn more about why COMP doesn’t pass our bar.

High-Quality Stocks for All Market Conditions

Donald Trump’s April 2025 "Liberation Day" tariffs sent markets into a tailspin, but stocks have since rebounded strongly, proving that knee-jerk reactions often create the best buying opportunities.

The smart money is already positioning for the next leg up. Don’t miss out on the recovery - check out our Top 5 Strong Momentum Stocks for this week. 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).

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 Kadant (+351% 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

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