Always an uncomfortable topic, overvalued stocks for sale stir up intense emotions for understandable reasons. Just like when a sports columnist criticizes an organization, it’s someone’s team the writer is attacking. So I understand: there is not only attachment at stake, but also money and perhaps a significant amount more.
However, abandoning certain ideas isn’t just about protecting your wallet from toxic companies. On the contrary, some companies that have received a red flag don’t do so because they are terrible. Instead, they may simply be overvalued stocks. Especially in the context of a questionable market and economy, it may not make sense to cling to potentially expansive ideas.
Of course, you don’t want to take my word for it, which is why I’m providing the data to back up my concerns. With that, below are some overvalued stocks to sell – or at least consider doing so before the new year.
Trade Office (TTD)
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As you can see by quickly looking at the graphs, Exchange Office (NASDAQ:TTD) was an overachiever. Since the start of this year, TTD has gained a very impressive 51% in its stock value. Over the past five years, shares have soared nearly 457%. Specializing in real-time programmatic marketing automation technologies, Trade Desk is relevant to the way modern audiences consume content.
Certainly, given its strong performance, it can be argued that the decline in shares since the end of July represents a discount opportunity. However, it may actually be one of the overvalued stocks to sell. Yes, Trade Desk has a three-year revenue growth rate of 31.7%, which is impressive. However, if you compare the last 12 months (TTM) total turnover for 2022, we are talking about a 16% expansion.
This is a notable contraction from previous growth. With this, you need to take into account the past year’s revenue multiple of 18.54x and its forward earnings multiple of 64x. Both statistics rank very high for the underlying industry. Maybe I’m on the wrong side of the deal here because analysts love it. But I don’t like the high premium placed on fading data.
MicroStrategy (MSTR)
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I will be criticized by the cryptocurrency community for even mentioning it MicroStrategy (NASDAQ:MSTR) in the context of overvalued stocks for sale. If you would like to continue the conversation, you are free to do it via my X account. Certainly, on paper, MSTR is hardly a name to avoid. After all, since the beginning of the year, MSTR has gained more than 235% of its equity value.
How can I not love this company? Well, here’s the deal. As Bloomberg pointed out, MicroStrategy once represented a struggling software company. However, the current president of the company, Michael Saylor, decided to turn the company into a proxy for the benchmark crypto. Since then, MSTR has naturally attracted a lot of attention. Unfortunately, what concerns me is that crypto proxies – such as blockchain miners – exhibit wild ebbs and flows.
If you look at MicroStrategy’s financial data, you’ll notice that it has stagnated around $500 million per year. And in recent years, it has absorbed losses. And partly because of MSTR’s incredible performance, it is vastly overvalued. We are talking about a multiple of forecast earnings greater than 169x. It’s just too much.
TFS Financial (TFSL)
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As a regional bank, TFS Financial (NASDAQ:TFSL) has attracted a lot of attention, but not necessarily for good reason. Earlier this year, the company suffered from the banking sector crisis which disproportionately affected regional players. Since then, some evidence indicates that many of these players have returned to health. Unfortunately, the latest news suggests that regional banks may continue to face pressure compared to their larger counterparts.
In all honesty, TFSL doesn’t look that bad on the charts. Since the market opened in January, the stock has lost a little over 5%, which isn’t bad considering the circumstances. Additionally, over the past month, TFSL has grown by almost 22%. However, it could also be a signal to contrarians that it may be poised to become one of the overvalued stocks to sell.
As the company saw its interest income explode, interest expenses also climbed. Therefore, the company’s fiscal 2023 revenue was strong compared to last year, but not shockingly so. Additionally, you have to pay a hefty premium for TFSL, which trades at a price/earnings/growth ratio (PEG) by almost 46X, worse than almost 99% of its competitors.
As of publication, Josh Enomoto did not hold (neither directly nor indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com Publishing Guidelines.
