Each stock in this article is trading near its 52-week high. These elevated prices usually indicate some degree of investor confidence, business improvements, or favorable market conditions.
But not every company with momentum is a long-term winner, and plenty of investors have lost money betting on short-term fads. All that said, here are three overhyped stocks that may correct and some you should consider instead.
Pegasystems (PEGA)
One-Month Return: +15.5%
With a "Center-out Business Architecture" approach that transcends organizational silos, Pegasystems (NASDAQ:PEGA) develops software that helps organizations automate workflows and use artificial intelligence to improve customer experiences and business processes.
Why Are We Hesitant About PEGA?
- Average billings growth of 13.5% over the last year was subpar, suggesting it struggled to push its software and might have to lower prices to stimulate demand
- Estimated sales growth of 3.6% for the next 12 months implies demand will slow from its two-year trend
- Customer acquisition costs take a while to recoup, making it difficult to justify sales and marketing investments that could increase revenue
At $61 per share, Pegasystems trades at 6.3x forward price-to-sales. Read our free research report to see why you should think twice about including PEGA in your portfolio.
Dillard's (DDS)
One-Month Return: +14.2%
With stores located largely in the Southern and Western US, Dillard’s (NYSE:DDS) is a department store chain that sells clothing, cosmetics, accessories, and home goods.
Why Does DDS Worry Us?
- Dearth of new stores suggests management is prioritizing the optimization of its existing locations over growth
- Disappointing same-store sales over the past two years show customers aren’t responding well to its product selection and store experience
- Sales are projected to tank by 2.1% over the next 12 months as demand evaporates further
Dillard’s stock price of $610.67 implies a valuation ratio of 23.1x forward P/E. Check out our free in-depth research report to learn more about why DDS doesn’t pass our bar.
Nelnet (NNI)
One-Month Return: -1.6%
Starting as a student loan servicer in the 1970s and evolving through the changing landscape of education finance, Nelnet (NYSE:NNI) provides student loan servicing, education technology, payment processing, and banking services while managing a portfolio of education loans.
Why Are We Cautious About NNI?
- Performance over the past two years shows its incremental sales were less profitable as its earnings per share were flat
Nelnet is trading at $127.07 per share, or 16.1x forward P/E. To fully understand why you should be careful with NNI, check out our full research report (it’s free).
Stocks We Like More
Donald Trump’s April 2025 "Liberation Day" tariffs sent markets into a tailspin, but stocks have since rebounded strongly, proving that knee-jerk reactions often create the best buying opportunities.
The smart money is already positioning for the next leg up. Don’t miss out on the recovery - 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 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 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 for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today
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