The stocks in this article are all trading near their 52-week highs. This strength often reflects positive developments such as new product launches, favorable industry trends, or improved financial performance.
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 not so much.
Two Stocks to Sell:
West Pharmaceutical Services (WST)
One-Month Return: +19.1%
Founded in 1923 and serving as a critical link in the pharmaceutical supply chain, West Pharmaceutical Services (NYSE:WST) manufactures specialized packaging, containment systems, and delivery devices for injectable drugs and healthcare products.
Why Are We Wary of WST?
- 4.9% annual revenue growth over the last two years was slower than its healthcare peers
- Costs have risen faster than its revenue over the last five years, causing its adjusted operating margin to decline by 5.8 percentage points
- Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability
West Pharmaceutical Services is trading at $291.96 per share, or 34.6x forward P/E. Check out our free in-depth research report to learn more about why WST doesn’t pass our bar.
Horace Mann Educators (HMN)
One-Month Return: +7.1%
Founded in 1945 and named after the 19th-century education reformer known as the "father of American public education," Horace Mann Educators (NYSE:HMN) is an insurance company that specializes in providing auto, property, life, and retirement products tailored for educators and other public service employees.
Why Is HMN Risky?
- Net premiums earned expanded by 5.7% annually over the last five years, falling below our expectations for the insurance sector
- Products and services are facing significant credit quality challenges during this cycle as book value per share has declined by 3.3% annually over the last five years
- Low return on equity reflects management’s struggle to allocate funds effectively
Horace Mann Educators’s stock price of $46.15 implies a valuation ratio of 1.2x forward P/B. If you’re considering HMN for your portfolio, see our FREE research report to learn more.
One Stock to Watch:
Northern Trust (NTRS)
One-Month Return: +22.5%
Founded in 1889 during Chicago's post-Great Fire rebuilding boom, Northern Trust (NASDAQ:NTRS) provides wealth management, asset servicing, and banking solutions to corporations, institutions, families, and high-net-worth individuals globally.
Why Are We Positive On NTRS?
- Share buybacks catapulted its annual earnings per share growth to 32.1%, which outperformed its revenue gains over the last two years
- Stellar return on equity showcases management’s ability to surface highly profitable business ventures
At $166.89 per share, Northern Trust trades at 15.5x forward P/E. Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.
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