1 Momentum Stock to Research Further and 2 Facing Headwinds

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. On that note, here is one stock with lasting competitive advantages and two not so much.

Two Momentum Stocks to Sell:

Callaway Golf Company (CALY)

One-Month Return: +11.3%

Formed between the merger of Callaway and Topgolf, Callaway Golf Company (NYSE:CALY) sells golf equipment and operates technology-driven golf entertainment venues.

Why Should You Sell CALY?

1. Muted 3.3% annual revenue growth over the last five years shows its demand lagged behind its consumer discretionary peers
2. Low free cash flow margin of 14.3% for the last two years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
3. Unchanged returns on capital make it difficult for the company’s valuation multiple to re-rate

Callaway Golf Company is trading at $17.81 per share, or 25.2x forward P/E. If you’re considering CALY for your portfolio, see our FREE research report to learn more.

HNI (HNI)

One-Month Return: +18.2%

With roots dating back to 1944 and a significant acquisition of Kimball International in 2023, HNI (NYSE:HNI) manufactures and sells office furniture systems, seating, and storage solutions, as well as residential fireplaces and heating products.

Why Are We Hesitant About HNI?

1. Incremental sales over the last two years were less profitable as its 9.3% annual earnings per share growth lagged its revenue gains
2. Poor free cash flow margin of 3.6% for the last five years limits its freedom to invest in growth initiatives, execute share buybacks, or pay dividends
3. 6× net-debt-to-EBITDA ratio shows it’s overleveraged and increases the probability of shareholder dilution if things turn unexpectedly

At $38.64 per share, HNI trades at 9.2x forward P/E. To fully understand why you should be careful with HNI, check out our full research report (it’s free).

One Momentum Stock to Watch:

Vertex Pharmaceuticals (VRTX)

One-Month Return: +11.9%

Founded in 1989 with a mission to create medicines that treat the underlying causes of disease rather than just symptoms, Vertex Pharmaceuticals (NASDAQ:VRTX) develops and markets transformative medicines for serious diseases, with a focus on cystic fibrosis, sickle cell disease, and pain management.

Why Is VRTX Interesting?

1. Offerings and unique value proposition resonate with customers, as seen in its above-market 13.8% annual sales growth over the last five years
2. Impressive free cash flow profitability enables the company to fund new investments or reward investors with share buybacks/dividends
3. Stellar returns on capital showcase management’s ability to surface highly profitable business ventures

Vertex Pharmaceuticals’s stock price of $498.66 implies a valuation ratio of 26.7x forward P/E. Is now the right time to buy? See for yourself in our in-depth research report, it’s free.

High-Quality Stocks for All Market Conditions

WHILE YOU’RE HERE: Top 9 Market-Beating Stocks. The best stocks don’t just beat the market once. They do it again. And again. Robust revenue growth, rising free cash flow, returns on capital that leave their competition in the dust. The market has already rewarded these businesses.

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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-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today.