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3 Overrated 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.
While momentum can be a leading indicator, it has burned many investors as it doesn’t always correlate with long-term success. On that note, here are three overhyped stocks that may correct and some you should consider instead.
America's Car-Mart (CRMT)
One-Month Return: +29.8%
With a strong presence in the Southern and Central US, America’s Car-Mart (NASDAQ:CRMT) sells used cars to budget-conscious consumers.
Why Do We Pass on CRMT?
- Weak same-store sales trends over the past two years suggest there may be few opportunities in its core markets to open new locations
- Revenue growth over the past three years was nullified by the company’s new share issuances as its earnings per share fell by 74.7% annually
America's Car-Mart’s stock price of $25.33 implies a valuation ratio of 53.5x forward P/E. To fully understand why you should be careful with CRMT, check out our full research report (it’s free for active Edge members).
Target Hospitality (TH)
One-Month Return: +35%
Building mini-communities at places such as oil drilling sites, Target Hospitality (NASDAQ:TH) is a provider of specialty workforce lodging accommodations and services.
Why Are We Out on TH?
- Demand for its offerings was relatively low as its number of utilized beds has underwhelmed
- Earnings per share lagged its peers over the last five years as they only grew by 10.1% annually
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
At $8.59 per share, Target Hospitality trades at 18.3x forward EV-to-EBITDA. Read our free research report to see why you should think twice about including TH in your portfolio.
DigitalBridge (DBRG)
One-Month Return: +52.3%
Transforming from a traditional real estate investor to a digital-focused powerhouse in 2021, DigitalBridge Group (NYSE:DBRG) is a global digital infrastructure investment firm that manages capital and operates assets across data centers, cell towers, fiber networks, and edge infrastructure.
Why Does DBRG Fall Short?
- Sales tumbled by 37.5% annually over the last five years, showing market trends are working against its favor during this cycle
- Underwhelming 1.4% return on equity reflects management’s difficulties in finding profitable growth opportunities
- Unprofitable operations could lead to additional rounds of dilutive equity financing if the credit window closes
DigitalBridge is trading at $15.68 per share, or 1.7x forward P/E. Check out our free in-depth research report to learn more about why DBRG doesn’t pass our bar.
Stocks We Like More
The market’s up big this year - but there’s a catch. Just 4 stocks account for half the S&P 500’s entire gain. That kind of concentration makes investors nervous, and for good reason. While everyone piles into the same crowded names, smart investors are hunting quality where no one’s looking - and paying a fraction of the price. Check out the high-quality names we’ve flagged in our Top 9 Market-Beating Stocks. 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-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today for free.
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