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. All that said, here are three stocks that are likely overheated and some you should look into instead.
iRhythm (IRTC)
One-Month Return: +12.9%
Pioneering the shift from bulky, short-term heart monitors to sleek, wire-free patches, iRhythm Technologies (NASDAQ:IRTC) provides wearable cardiac monitoring devices and AI-powered analysis services that help physicians detect and diagnose heart rhythm disorders.
Why Does IRTC Fall Short?
- Subscale operations are evident in its revenue base of $657.2 million, meaning it has fewer distribution channels than its larger rivals
- Negative free cash flow raises questions about the return timeline for its investments
- High net-debt-to-EBITDA ratio increases the risk of forced asset sales or dilutive financing if operational performance weakens
At $181.26 per share, iRhythm trades at 84.1x forward EV-to-EBITDA. Check out our free in-depth research report to learn more about why IRTC doesn’t pass our bar.
Texas Capital Bank (TCBI)
One-Month Return: +9.8%
Founded during the Texas banking renaissance of the 1990s with an entrepreneurial spirit, Texas Capital Bancshares (NASDAQ:TCBI) is a financial services firm that provides banking, wealth management, and investment banking services to businesses and individuals across Texas and beyond.
Why Does TCBI Worry Us?
- Muted 2.2% annual net interest income growth over the last five years shows its demand lagged behind its banking peers
- Net interest margin of 3.1% is well below other banks, signaling its loans aren’t very profitable
- Incremental sales over the last five years were much less profitable as its earnings per share fell by 11.1% annually while its revenue grew
Texas Capital Bank’s stock price of $87.23 implies a valuation ratio of 1.2x forward P/B. To fully understand why you should be careful with TCBI, check out our full research report (it’s free).
PNC Financial Services Group (PNC)
One-Month Return: +9%
Tracing its roots back to 1852 when Pittsburgh's industrial boom demanded stronger financial institutions, PNC (NYSE:PNC) is a diversified financial institution that provides retail banking, corporate banking, and asset management services through a coast-to-coast branch network.
Why Are We Hesitant About PNC?
- Scale is a double-edged sword because it limits the firm’s growth potential compared to its smaller competitors, as reflected in its below-average annual net interest income increases of 6.9% for the last five years
- Net interest margin of 2.7% is well below other banks, signaling its loans aren’t very profitable
- Tangible book value per share is projected to decrease by 5.3% over the next 12 months as capital generation weakens
PNC Financial Services Group is trading at $205.46 per share, or 1.5x forward P/B. Dive into our free research report to see why there are better opportunities than PNC.
Stocks We Like More
Donald Trump’s April 2025 "Liberation Day" tariffs sent markets into a tailspin, but stocks have since rebounded strongly, proving that knee-jerk reactions often create the best buying opportunities.
The smart money is already positioning for the next leg up. Don’t miss out on the recovery - check out our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
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 Exlservice (+354% five-year return). Find your next big winner with StockStory today for free.
StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.