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. On that note, here is one stock with the fundamentals to back up its performance and two that may correct.
Two Momentum Stocks to Sell:
FormFactor (FORM)
One-Month Return: +29.8%
With customers across the foundry and fabless markets, FormFactor (NASDAQ:FORM) is a US-based provider of test and measurement technologies for semiconductors.
Why Are We Hesitant About FORM?
- Annual revenue growth of 2.5% over the last five years was below our standards for the semiconductor sector
- Weak free cash flow margin of 5.9% has deteriorated further over the last five years as its investments increased
- Below-average returns on capital indicate management struggled to find compelling investment opportunities, and its shrinking returns suggest its past profit sources are losing steam
At $94.15 per share, FormFactor trades at 51.8x forward P/E. If you’re considering FORM for your portfolio, see our FREE research report to learn more.
Callaway Golf Company (CALY)
One-Month Return: -9.2%
Formed between the merger of Callaway and Topgolf, Callaway Golf Company (NYSE:CALY) sells golf equipment and operates technology-driven golf entertainment venues.
Why Do We Think CALY Will Underperform?
- Constant currency growth was below our standards over the past two years, suggesting it might need to invest in product improvements to get back on track
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 2% for the last two years
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
Callaway Golf Company’s stock price of $12.85 implies a valuation ratio of 66.4x forward P/E. Check out our free in-depth research report to learn more about why CALY doesn’t pass our bar.
One Momentum Stock to Watch:
CACI (CACI)
One-Month Return: -7.2%
Founded to commercialize SIMSCRIPT, CACI International (NYSE:CACI) offers defense, intelligence, and IT solutions to support national security and government transformation efforts.
Why Are We Positive On CACI?
- Demand is greater than supply as the company’s 11.5% average backlog growth over the past two years shows it’s securing new contracts and accumulating more orders than it can fulfill
- Estimated revenue growth of 10.2% for the next 12 months implies its momentum over the last two years will continue
- Performance over the past two years was turbocharged by share buybacks, which enabled its earnings per share to grow faster than its revenue
CACI is trading at $560.85 per share, or 19.1x forward P/E. Is now a good time to buy? See for yourself in our in-depth research report, it’s free.
Stocks We Like Even More
If your portfolio success hinges on just 4 stocks, your wealth is built on fragile ground. You have a small window to secure high-quality assets before the market widens and these prices disappear.
Don’t wait for the next volatility shock. Check out our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).
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.