3 Overrated Stocks We Steer Clear Of

3 Overrated Stocks We Steer Clear Of

Radek Strnad

Thu, February 12, 2026 at 1:40 PM GMT+9 3 min read

In this article:

SMTC

-0.07%

KMT

-2.04%

ZM

-2.99%

Each stock in this article is trading near its 52-week high. These elevated prices usually indicate some degree of investor confidence, business improvements, or favorable market conditions.

However, not all companies with momentum are long-term winners, and many investors have lost money by following short-term trends. All that said, here are three stocks getting more buzz than they deserve and some you should buy instead.

Zoom (ZM)

One-Month Return: +6.1%

Once the verb that defined remote work during the pandemic (“let’s Zoom later”), Zoom (NASDAQ:ZM) provides a cloud-based platform for video meetings, phone calls, team chat, and collaboration tools that helps businesses and individuals connect virtually.

Why Should You Dump ZM?

Average billings growth of 3.9% over the last year was subpar, suggesting it struggled to push its software and might have to lower prices to stimulate demand

Customers have churned over the last year due to the commoditized nature of its software, as reflected in its 98% net revenue retention rate

Anticipated sales growth of 3.6% for the next year implies demand will be shaky

At $92.07 per share, Zoom trades at 5.8x forward price-to-sales. Check out our free in-depth research report to learn more about why ZM doesn’t pass our bar.

Semtech (SMTC)

One-Month Return: +11.1%

A public company since the late 1960s, Semtech (NASDAQ:SMTC) is a provider of analog and mixed-signal semiconductors used for Internet of Things systems and cloud connectivity.

Why Are We Out on SMTC?

Mounting operating losses demonstrate the tradeoff between growth and profitability

Low free cash flow margin of 9.3% declined over the last five years as its investments ramped, giving it little breathing room

Negative returns on capital show that some of its growth strategies have backfired, and its shrinking returns suggest its past profit sources are losing steam

Semtech is trading at $88.54 per share, or 44.7x forward P/E. If you’re considering SMTC for your portfolio, see our FREE research report to learn more.

Kennametal (KMT)

One-Month Return: +36.4%

Involved in manufacturing hard tips of anti-tank projectiles in World War II, Kennametal (NYSE:KMT) is a provider of industrial materials and tools for various sectors.

Why Do We Steer Clear of KMT?

Sales tumbled by 1.1% annually over the last two years, showing market trends are working against its favor during this cycle

Core business is underperforming as its organic revenue has disappointed over the past two years, suggesting it might need acquisitions to stimulate growth

Earnings per share lagged its peers over the last two years as they only grew by 1.9% annually

 






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Kennametal’s stock price of $41.92 implies a valuation ratio of 16.8x forward P/E. To fully understand why you should be careful with KMT, check out our full research report (it’s free).

Stocks We Like More

If your portfolio success hinges on just 4 stocks, your wealth is built on fragile ground. You have a small window to secure high-quality assets before the market widens and these prices disappear.

Don’t wait for the next volatility shock. Check out our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 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.

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