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 three stocks that are likely overheated and some you should look into instead.
Xponential Fitness (XPOF)
One-Month Return: +20.7%
Owner of Club Pilates, Stretch Lab, BFT and Pure Barre, Xponential Fitness (NYSE:XPOF) is a boutique fitness brand offering diverse and specialized exercise experiences.
Why Do We Avoid XPOF?
- Lackluster 19.5% annual revenue growth over the last five years indicates the company is losing ground to competitors
- Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results
- High net-debt-to-EBITDA ratio of 5× increases the risk of forced asset sales or dilutive financing if operational performance weakens
Xponential Fitness’s stock price of $4.82 implies a valuation ratio of 8.4x forward P/E. To fully understand why you should be careful with XPOF, check out our full research report (it’s free).
Ruger (RGR)
One-Month Return: +17.5%
Founded in 1949, Ruger (NYSE:RGR) is an American manufacturer of firearms for the commercial sporting market.
Why Is RGR Risky?
- Products and services have few die-hard fans as sales have declined by 3.8% annually over the last five years
- Low free cash flow margin of 7.7% for the last two years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
- Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
Ruger is trading at $44.22 per share, or 22.8x forward P/E. Read our free research report to see why you should think twice about including RGR in your portfolio.
RXO (RXO)
One-Month Return: +47.4%
With access to millions of trucks, RXO (NYSE:RXO) offers full-truckload, less-than-truckload, and last-mile deliveries.
Why Do We Think RXO Will Underperform?
- Declining unit sales over the past two years indicate demand is soft and that the company may need to revise its strategy
- 5.3 percentage point decline in its free cash flow margin over the last five years reflects the company’s increased investments to defend its market position
- Limited cash reserves may force the company to seek unfavorable financing terms that could dilute shareholders
At $28.69 per share, RXO trades at 81.9x forward P/E. If you’re considering RXO for your portfolio, see our FREE research report to learn more.
High-Quality Stocks for All Market Conditions
ONE MORE THING: Top 5 Growth Stocks. The biggest stock winners almost always had one thing in common before they ran. Revenue growing like crazy. Meta. CrowdStrike. Broadcom. Our AI flagged all three. They returned 315%, 314%, and 455%, respectively.
Find out which 5 stocks it’s flagging this month — FREE. Get Our Top 5 Growth 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-micro-cap company Tecnoglass (+1,552% between June 2020 and June 2025). Find your next big winner with StockStory today.