1 Momentum Stock with Impressive Fundamentals and 2 We Avoid

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.

But not every company with momentum is a long-term winner, and plenty of investors have lost money betting on short-term fads. Keeping that in mind, here is one stock with the fundamentals to back up its performance and two best left ignored.

Two Momentum Stocks to Sell:

Intel (INTC)

One-Month Return: +55.5%

Inventor of the x86 processor that powered decades of technological innovation in PCs, data centers, and numerous other markets, Intel (NASDAQ:INTC) is a leading manufacturer of computer processors and graphics chips.

Why Do We Steer Clear of INTC?

1. Products and services are facing significant end-market challenges during this cycle as sales have declined by 6.2% 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 40.1% annually, worse than its revenue
3. Free cash flow margin shrank by 18.3 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive

Intel is trading at $68.23 per share, or 134.9x forward P/E. Check out our free in-depth research report to learn more about why INTC doesn’t pass our bar.

Edgewell Personal Care (EPC)

One-Month Return: +21.3%

Boasting brands such as Banana Boat, Schick, and Skintimate, Edgewell Personal Care (NYSE:EPC) sells personal care products in the skin and sun care, shave, and feminine care categories.

Why Is EPC Risky?

1. Absence of organic revenue growth over the past two years suggests it may have to lean into acquisitions to drive its expansion
2. Operating profits fell over the last year as its sales dropped and it struggled to adjust its fixed costs
3. High net-debt-to-EBITDA ratio of 6× increases the risk of forced asset sales or dilutive financing if operational performance weakens

Edgewell Personal Care’s stock price of $23.40 implies a valuation ratio of 10.7x forward P/E. Dive into our free research report to see why there are better opportunities than EPC.

One Momentum Stock to Buy:

Limbach (LMB)

One-Month Return: +32.8%

Established in 1901, Limbach (NASDAQ: LMB) provides integrated building systems solutions, including mechanical, electrical, and plumbing services.

Why Are We Backing LMB?

1. Annual revenue growth of 11.9% over the past two years was outstanding, reflecting market share gains this cycle
2. Incremental sales significantly boosted profitability as its annual earnings per share growth of 46.5% over the last two years outstripped its revenue performance
3. Free cash flow margin expanded by 11.6 percentage points over the last five years, providing additional flexibility for investments and share buybacks/dividends

At $93.61 per share, Limbach trades at 19.9x forward P/E. Is now a good time to buy? See for yourself in our in-depth research report, it’s free.

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