Great things are happening to the stocks in this article. They’re all outperforming the market over the last month because of positive catalysts such as a new product line, constructive news flow, or even a loyal Reddit fanbase.
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 are two stocks with lasting competitive advantages and one that may correct.
One Momentum Stock to Sell:
Elanco (ELAN)
One-Month Return: +34.1%
Originally established as a division of pharmaceutical giant Eli Lilly before becoming independent in 2018, Elanco Animal Health (NYSE: ELAN) develops and sells medications, vaccines, and other health products for pets and farm animals across more than 90 countries.
Why Does ELAN Worry Us?
- Underwhelming constant currency revenue performance over the past two years suggests its product offering at current prices doesn’t resonate with customers
- Performance over the past five years was negatively impacted by new share issuances as its earnings per share were flat while its revenue grew
- Negative returns on capital show that some of its growth strategies have backfired
At $12.75 per share, Elanco trades at 15.7x forward P/E. If you’re considering ELAN for your portfolio, see our FREE research report to learn more.
Two Momentum Stocks to Buy:
Zscaler (ZS)
One-Month Return: +15.5%
After successfully selling all four of his previous cybersecurity companies, Jay Chaudhry's fifth venture, Zscaler (NASDAQ: ZS) offers software-as-a-service that helps companies securely connect to applications and networks in the cloud.
Why Is ZS a Good Business?
- Customers view its software as mission-critical to their operations as its ARR has averaged 26.7% growth over the last year
- Projected revenue growth of 19.7% for the next 12 months suggests its momentum from the last three years will persist
- Strong free cash flow margin of 28.7% enables it to reinvest or return capital consistently
Zscaler is trading at $254 per share, or 13.5x forward price-to-sales. Is now the right time to buy? Find out in our full research report, it’s free.
DexCom (DXCM)
One-Month Return: +16.9%
Founded in 1999 and receiving its first FDA approval in 2006, DexCom (NASDAQ: DXCM) develops and sells continuous glucose monitoring systems that allow people with diabetes to track their blood sugar levels without repeated finger pricks.
Why Do We Love DXCM?
- Average organic revenue growth of 19.2% over the past two years demonstrates its ability to expand independently without relying on acquisitions
- Additional sales over the last five years increased its profitability as the 23.2% annual growth in its earnings per share outpaced its revenue
- ROIC punches in at 25%, illustrating management’s expertise in identifying profitable investments
DexCom’s stock price of $83.20 implies a valuation ratio of 39.4x forward P/E. Is now the time to initiate a position? See for yourself in our in-depth research report, it’s free.
High-Quality Stocks for All Market Conditions
Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.
While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 176% over the last five years.
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-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today for free.
