The stocks featured in this article are seeing some big returns. Over the past month, they’ve outpaced the market due to some combination of positive news, upbeat results, or supportive macro developments. As such, investors are taking notice and bidding up shares.
However, not all companies with momentum are long-term winners, and many investors have lost money by following short-term trends. Keeping that in mind, here are two stocks we think live up to the hype and one that may correct.
One-Month Return: +25.3%
Occasionally featuring celebrity hosts like Ryan Seacrest on its shows, iHeartMedia (NASDAQ:IHRT) is a leading multimedia company renowned for its extensive network of radio stations, digital platforms, and live events across the globe.
Why Do We Steer Clear of IHRT?
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Flat sales over the last two years suggest it must innovate and find new ways to grow
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Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results
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Short cash runway increases the probability of a capital raise that dilutes existing shareholders
At $2.70 per share, iHeartMedia trades at 0.6x forward EV-to-EBITDA. To fully understand why you should be careful with IHRT, check out our full research report (it’s free for active Edge members).
One-Month Return: +16%
Named after a database the founders had to painstakingly look after at their previous company, Datadog (NASDAQ:DDOG) provides a software platform that helps organizations monitor and secure their cloud applications, infrastructure, and services.
Why Will DDOG Outperform?
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ARR growth averaged 26% over the last year, showing customers are willing to take multi-year bets on its software
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Software platform has product-market fit given the rapid recovery of its customer acquisition costs
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Robust free cash flow margin of 28.3% gives it many options for capital deployment
Datadog is trading at $161.36 per share, or 16.2x forward price-to-sales. Is now a good time to buy? Find out in our full research report, it’s free for active Edge members.
One-Month Return: +11.6%
Headquartered in Israel, Nova (NASDAQ:NVMI) is a provider of quality control systems used in semiconductor manufacturing.
Why Should You Buy NVMI?
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Impressive 21.1% annual revenue growth over the last two years indicates it’s winning market share this cycle
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Earnings per share grew by 34.1% annually over the last five years, massively outpacing its peers
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Impressive free cash flow profitability enables the company to fund new investments or reward investors with share buybacks/dividends
