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 is one stock with the fundamentals to back up its performance and two best left ignored.
One-Month Return: +16.2%
Founded in 2009 by enterprise software veteran Tom Seibel, C3.ai (NYSE:AI) provides software that makes it easy for organizations to add artificial intelligence technology to their applications.
Why Are We Wary of AI?
Revenue increased by 16.4% annually over the last three years, acceptable on an absolute basis but tepid for a software company enjoying secular tailwinds
Gross margin of 59.9% is way below its competitors, leaving less money to invest in areas like marketing and R&D
Customer acquisition costs take a while to recoup, making it difficult to justify sales and marketing investments that could increase revenue
C3.ai’s stock price of $23.30 implies a valuation ratio of 6.9x forward price-to-sales. If you’re considering AI for your portfolio, see our FREE research report to learn more.
One-Month Return: +33.1%
Founded in 1961, Kimball Electronics (NYSE:KE) is a global contract manufacturer specializing in electronics and manufacturing solutions for automotive, medical, and industrial markets.
Why Should You Sell KE?
Sales tumbled by 5% annually over the last two years, showing market trends are working against its favor during this cycle
Falling earnings per share over the last four years has some investors worried as stock prices ultimately follow EPS over the long term
Poor free cash flow margin of -0.3% for the last five years limits its freedom to invest in growth initiatives, execute share buybacks, or pay dividends
Kimball Electronics is trading at $18.05 per share, or 17x forward P/E. Dive into our free research report to see why there are better opportunities than KE.
One-Month Return: +8.1%
Founded during the emergence of Big Oil in Texas, DXP (NASDAQ:DXPE) provides pumps, valves, and other industrial components.
Why Could DXPE Be a Winner?
Operating profits and efficiency rose over the last five years as it benefited from some fixed cost leverage
Performance over the past two years was turbocharged by share buybacks, which enabled its earnings per share to grow faster than its revenue
Returns on capital are climbing as management makes more lucrative bets
Story Continues
