As stocks approach their 52-week highs, investors often see strong business execution, positive market sentiment, or significant industry tailwinds. However, not all momentum stocks are long-term winners. Here’s a look at two stocks with solid fundamentals and one that may be due for a correction.
Packaging Corporation of America (PKG) is a stock to consider selling. Over the last month, its shares have risen by 5.4%. Despite this, the company’s annual revenue growth of 5.8% over the last five years falls short of industry standards. Operating margins have declined by 6.3 percentage points, and returns on capital are diminishing. Currently trading at $247.29 with a forward P/E of 18.4x, PKG may not be the best long-term investment.
UnitedHealth (UNH) stands out as a potential winner. With a one-month return of 10.7%, the company has shown impressive revenue growth of 10% annually over the last five years. Its massive scale, with $449.7 billion in revenue, allows it to spread costs efficiently. Stellar returns on capital highlight management’s ability to drive profitability. UNH is trading at $418.20 per share, or 18.7x forward P/E.
Nicolet Bankshares (NIC) is another stock to watch, with a one-month return of 4.2%. The regional bank has seen a remarkable 27.9% annual net interest income growth over the last five years. Projected net interest income growth of 22.3% for the next 12 months suggests continued market share gains. NIC trades at $173.73 per share, with a forward P/B of 1.5x.