U.S. Markets closed

7 Red-Hot Stocks That Have Run Out of Steam

Wayne Duggan

These stocks' best days are behind them.

All good things must come to an end, and that adage is even true on Wall Street. Even the best stocks don't keep climbing in a straight line forever. It can be difficult to take profits in a stock that has performed exceptionally well, but sometimes the best move is to cash in on big gains before they go away. Given concerns over a global economic slowdown and uncertainty surrounding the U.S. trade war with China, here are seven stocks up 35% in the past year that the CFRA analyst team says may have run out of steam.

American Water Works Co. (ticker: AWK)

American Water provides regulated water service to customers in 16 states. Analyst Christopher Muir says American Water's valuation has simply gotten too rich following its recent run. CFRA is projecting rate increases, customer growth and acquisitions will drive 5.7% revenue growth in 2019 and 4.8% revenue growth in 2020. However, the stock is trading at roughly 30 times Muir's 2020 earnings per share estimate, suggesting additional upside is extremely limited. AWK stock is up 45.5% in the past year, but CFRA has a "sell" rating and $113 price target.

Casey's General Stores (CASY)

Casey's owns and operates a portfolio of convenience stores and gas stations in the U.S. Midwest. Analyst Arun Sundaram says CASY stock has become overvalued after its big run. Sundaram says revenue growth will slow from 11.5% in fiscal 2019 to just 5.5% in 2020. At the same time, he says the stock's forward earnings multiple of around 26 is at the high end of its historical valuation range. CASY stock is up 50.3% in the past year, but CFRA has a "sell" rating and $130 price target.

Crown Holdings (CCK)

Crown Holdings is a global metal packaging supplier, focusing primarily on beverage and food cans. Analyst Matthew Miller says Crown shares are fully valued, especially considering the company's balance sheet risk. In the long term, Miller says Crown is positioned to capitalize on emerging markets growth thanks to its large exposure to the Asia-Pacific region. However, he says the stock has high exposure to a global economic slowdown given less than half of its sales come from the Americas. CCK stock is up 52.3% in the past year, but CFRA has a "sell" rating and $53 price target.

Fair Isaac Corp. (FICO)

Fair Isaac is a decision management solution provider. Analyst John Freeman says even after recently raising his fiscal 2020 EPS estimate, Fair Isaac's multiple expansion over the past year has been overly generous given questions surrounding the durability of the company's double-digit EPS growth. Fair Isaac's forward earnings multiple has expanded from 24.7 at the end of fiscal 2017 to above 43 today, and Freeman says the bar is now exceptionally high given that lofty valuation. FICO stock is up 58% in the past year, but CFRA has a "sell" rating and $293 price target.

NVR (NVR)

NVR is one of the top five U.S. homebuilders by volume. Analyst Kenneth Leon says the U.S. Southeast region creates difficulties given most of the housing demand in the region is for entry-level homes. NVR is most exposed to the mid-Atlantic region, where unit orders have dropped by 4%. Leon is forecasting revenue growth will drop from 15% in 2018 to just 2% this year. NVR stock is up 35.9% in the past year, but CFRA has a "sell" rating and $3,200 price target.

Snap (SNAP)

Snap stock has snapped back to life in the past year following a horrendous first year on the market as revenue and user growth have outpaced Wall Street expectations. Unfortunately, Freeman says there are several reasons to be cautious on Snap at this point. Snap continues to report large operational losses, it will likely not be profitable until fiscal 2020, and it likely does not have enough cash to cover near-term operations without some form of dilutive financing. SNAP stock is up 40.1% in the past year, but CFRA has a "sell" rating and $14 price target.

WEC Energy Group (WEC)

WEC Energy is a diversified utility holding company with the majority of its exposure to the Wisconsin, Minnesota, Illinois and Michigan markets. Muir says rate increases and customer growth will drive 2.2% revenue growth in 2019 and 2.9% growth in 2020. However, Muir says the stock is simply overvalued at more than 25 times 2020 EPS estimates. Long term efforts to reduce carbon dioxide emissions will create large costs that will eat into margins, Muir says. WEC stock is up 43.3% in the past year, but CFRA has a "sell" rating and $77 price target.

Once-hot stocks that you should sell now:

-- American Water Works Co. (AWK)

-- Casey's General Stores (CASY)

-- Crown Holdings (CCK)

-- Fair Isaac Corp. (FICO)

-- NVR (NVR)

-- Snap (SNAP)

-- WEC Energy Group (WEC)



More From US News & World Report