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1 Surging Stock on Our Buy List and 2 We Ignore
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.
While momentum can be a leading indicator, it has burned many investors as it doesn’t always correlate with long-term success. All that said, here is one stock with the fundamentals to back up its performance and two that may correct.
Two Stocks to Sell:
Scholastic (SCHL)
One-Month Return: -6.1%
Creator of the legendary Scholastic Book Fair, Scholastic (NASDAQ:SCHL) is an international company specializing in children's publishing, education, and media services.
Why Do We Think SCHL Will Underperform?
- Sales trends were unexciting over the last five years as its 4% annual growth was below the typical consumer discretionary company
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 14.5% for the last two years
- Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results
Scholastic’s stock price of $43.29 implies a valuation ratio of 16.9x forward P/E. If you’re considering SCHL for your portfolio, see our FREE research report to learn more.
Oceaneering (OII)
One-Month Return: +20.8%
Deploying a fleet of 250 tethered underwater robots around the globe, Oceaneering International (NYSE:OII) provides remotely operated underwater vehicles and subsea equipment for offshore energy exploration.
Why Do We Pass on OII?
- Annual revenue growth of 9.8% over the last five years was below our standards for the energy upstream and integrated energy sector
- Costly operations and weak unit economics result in an inferior gross margin of 17.7% that must be offset through higher production volumes
- Low free cash flow margin of 4.5% for the last five years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
Oceaneering is trading at $47.77 per share, or 9.8x forward EV-to-EBITDA. Dive into our free research report to see why there are better opportunities than OII.
One Stock to Buy:
Cloudflare (NET)
One-Month Return: +8.1%
With a massive network spanning more than 310 cities in over 120 countries, Cloudflare (NYSE:NET) provides a global network that delivers security, performance and reliability services to protect websites, applications, and corporate networks.
Why Will NET Outperform?
- Billings growth has averaged 34.2% over the last year, indicating a healthy pipeline of new contracts that should drive future revenue increases
- Revenue outlook for the upcoming 12 months is outstanding and shows it’s on track to gain market share
- Well-designed software integrates seamlessly with other workflows, enabling swift payback periods on marketing expenses and customer growth at scale
At $263.44 per share, Cloudflare trades at 31.7x forward price-to-sales. Is now a good time to buy? See for yourself in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
ONE MORE THING: Top 5 Growth Stocks. The biggest stock winners almost always had one thing in common before they ran. Revenue growing like crazy. Meta. CrowdStrike. Broadcom. Our AI flagged all three. They returned 315%, 314%, and 455%, respectively.
Find out which 5 stocks it’s flagging this month — FREE. Get Our Top 5 Growth Stocks for Free HERE.
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+271% between June 2020 and June 2025). Find your next big winner with StockStory today.