Weighing the United States economy’s resilience, characterized by labor force participation, inflation, and wages, hints at an unexpected robustness. A surprising recovery has quashed long-term scar concerns and defied pessimism. Eventuating challenges haven’t dimmed the brighter than anticipated state of the economy and society. However, in the wake of this bullish news, bidding adieu to overvalued stocks that have skyrocketed more than 500% becomes a prudent move. Time to jettison these three stocks to bolster profits elsewhere.

Carvana Co. (CVNA)

Source: Ken Wolter / Shutterstock.com

Carvana Co. pioneered the online used-car retail sphere. Despite its household name and early market entry, this company grapples with numerous underlying challenges.

Carvana soared 1043.41% in 2023. Regrettably, its financial standing doesn’t hold water. Though consistently surpassing earnings projections, Carvana’s EBITDA rests at $-153 million. Riddled with a $6.44 billion debt, offset by meager $920 million cash reserves, Carvana’s return on equity languishes at -1,268.60%. A manifest dearth of profitability and earning potential emerges.

Carvana’s fortunes hinge heavily on extrinsic factors: interest rates, new car prices, and used car values. An interest rate reduction by the Federal Reserve renders car loans more feasible, stimulating new car sales and eroding Carvana’s market share. Moreover, the previously inflated used car domain is deflating, squeezing Carvana’s profit margins.

The concatenation of lackluster financials and formidable macroeconomic shifts presage doom for Carvana’s future. Consequently, divesting from this stock merits serious investor deliberation.

Jin Medical International (ZJYL)

Source: shutterstock.com/Anastasia Zagoruyko

Jin Medical International Ltd (NASDAQ:ZJYL) specializes in designing and fabricating wheelchairs and living aids for individuals with disabilities, the elderly, and those recuperating from injuries.

Having commenced trading only in March 2023, ZJYL, rocketing 3,020.1%, clinched the coveted top spot among the year’s finest-performing stocks listed on major U.S. exchanges with at least $1 billion market capitalization. Nevertheless, its financials raise eyebrows, evincing relatively sluggish growth over the past half-decade. A case in point is the meager 3.93% growth in revenue.

Stocks on the Edge: A Cautionary Tale for Investors

Struggling Finances of ZJYL

Surrounded by a volatile market, ZJYL, a medical equipment company, has found itself in dire straits. Its fiscal year revenue amounted to $19.19 million in 2022, but it dwindled to $19.976 million TTM. This decline, marking a 4.78% decrease since 2018, has positioned ZJYL below the average for companies within the medical equipment industry. Moreover, the surge in its share price has led to a soaring P/S ratio and P/E, indicating high but risky expectations.

Marathon Digital Holdings (MARA) in the Spotlight

Source: Yev_1234 / Shutterstock

Marathon Digital Holdings Inc. (NASDAQ:MARA) surged by a remarkable 586.8% in 2023, securing its place among the best-performing stocks. While its revenue has soared by 98.31% since 2020, other financial aspects paint a less rosy picture. With a negative gross profit, operating income, and operating cash flow, coupled with a hefty debt and meager cash, MARA’s profitability stands at a dismal -133.72%. Operating in the volatile realm of cryptocurrency, particularly Bitcoin, adds another layer of risk. The impending Bitcoin “halving” in 2024 further muddies the waters, potentially leading to increased mining costs and resultant losses for MARA if Bitcoin’s value fails to soar. In light of these unfavorable prospects, selling this high-risk, high-reward investment option may prove to be a prudent move for risk-averse investors seeking a robust portfolio.