3 Inflated Stocks We Steer Clear Of

Exciting developments are taking place for the stocks in this article. They’ve all surged ahead of the broader market over the last month as catalysts such as new products and positive media coverage have propelled their returns.

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 overhyped stocks that may correct and some you should consider instead.

Parsons (PSN)

One-Month Return: +19%

Delivering aerospace technology during the Cold War-era, Parsons (NYSE:PSN) offers engineering, construction, and cybersecurity solutions for the infrastructure and defense sectors.

Why Is PSN Not Exciting?

1. 4.2% annual revenue growth over the last two years was slower than its industrials peers
2. Flat backlog over the past two years has disappointed and shows fewer customers signed long-term contracts
3. ROIC of 7% reflects management’s challenges in identifying attractive investment opportunities

Parsons’s stock price of $60.55 implies a valuation ratio of 17.4x forward P/E. Dive into our free research report to see why there are better opportunities than PSN.

Leonardo DRS (DRS)

One-Month Return: +19.6%

Developing submarine detection systems for the U.S. Navy, Leonardo DRS (NASDAQ:DRS) is a provider of defense systems, electronics, and military support services.

Why Does DRS Give Us Pause?

1. Muted 5.1% annual revenue growth over the last five years shows its demand lagged behind its industrials peers
2. Sales pipeline suggests its future revenue growth won’t meet our standards as its backlog averaged 1.1% declines over the past two years
3. Waning returns on capital imply its previous profit engines are losing steam

Leonardo DRS is trading at $47.87 per share, or 3.2x forward price-to-sales. To fully understand why you should be careful with DRS, check out our full research report (it’s free).

HP (HPQ)

One-Month Return: +30%

Born from the legendary Silicon Valley garage startup founded by Bill Hewlett and Dave Packard in 1939, HP (NYSE:HPQ) designs and sells personal computers, printers, and related technology products and services to consumers, businesses, and enterprises worldwide.

Why Do We Avoid HPQ?

1. Customers postponed purchases of its products and services this cycle as its revenue declined by 1.2% annually over the last five years
2. Sales are projected to remain flat over the next 12 months as demand decelerates from its two-year trend
3. Incremental sales over the last two years were less profitable as its earnings per share were flat while its revenue grew

At $27.09 per share, HP trades at 9.2x forward P/E. Read our free research report to see why you should think twice about including HPQ in your portfolio.

High-Quality Stocks for All Market Conditions

ALSO WORTH WATCHING: Top 5 Momentum Stocks. The best time to own a great stock is when the market is finally noticing it. These aren’t just high-quality businesses. Something is happening with them right now. Elite fundamentals meet near-term momentum — both boxes checked at the same time.

Find out which stocks our AI platform is flagging this week. See this week’s Strong Momentum stocks — FREE. Get Our Strong Momentum Stocks for Free HERE.

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 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.