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 three overhyped stocks that may correct and some you should consider instead.

PubMatic (PUBM)

One-Month Return: +15%

Powering billions of daily ad impressions across the open internet, PubMatic (NASDAQ:PUBM) operates a technology platform that helps publishers maximize revenue from their digital advertising inventory while giving advertisers more control and transparency.

Why Are We Out on PUBM?

1. Customers have churned over the last year due to the commoditized nature of its software, as reflected in its 96% net revenue retention rate

2. Competitive market means the company must spend more on sales and marketing to stand out even if the return on investment is low

3. Day-to-day expenses have swelled relative to revenue over the last year as its operating margin fell by 7.4 percentage points

PubMatic’s stock price of $9.20 implies a valuation ratio of 1.6x forward price-to-sales. Check out our free in-depth research report to learn more about why PUBM doesn’t pass our bar .

OneWater (ONEW)

One-Month Return: +18.2%

A public company since early 2020, OneWater Marine (NASDAQ:ONEW) sells boats, yachts, and other marine products.

Why Should You Sell ONEW?

1. Lagging same-store sales over the past two years suggest it might have to change its pricing and marketing strategy to stimulate demand

2. Performance over the past three years shows its incremental sales were much less profitable, as its earnings per share fell by 53.6% annually

3. High net-debt-to-EBITDA ratio of 7× could force the company to raise capital at unfavorable terms if market conditions deteriorate

OneWater is trading at $10.94 per share, or 54.6x forward P/E. Read our free research report to see why you should think twice about including ONEW in your portfolio, it’s free .

Avnet (AVT)

One-Month Return: +25.1%

With a century-long history of adapting to technological evolution, Avnet (NASDAQ:AVT) is a global electronic components distributor that connects manufacturers of semiconductors and other electronic parts with businesses that need these components.

Why Are We Cautious About AVT?

1. Annual sales declines of 4.9% for the past two years show its products and services struggled to connect with the market during this cycle

2. Falling earnings per share over the last two years has some investors worried as stock prices ultimately follow EPS over the long term

3. Poor free cash flow margin of -0.2% for the last five years limits its freedom to invest in growth initiatives, execute share buybacks, or pay dividends