Growth boosts valuation multiples, but it doesn’t always last forever. Companies that cannot maintain it are often penalized with large declines in market value, a lesson ingrained in investors who lost money in tech stocks during 2022.
The risks that can come from buying these assets is precisely why we started StockStory - to isolate the long-term winners from the losers so you can invest with confidence. On that note, here is one growth stock with significant upside potential and two that could be down big.
Two Growth Stocks to Sell:
Taboola (TBLA)
One-Year Revenue Growth: +16.6%
Often appearing as those "You May Also Like" or "Recommended For You" boxes at the bottom of news articles, Taboola (NASDAQ: TBLA) operates a digital platform that recommends personalized content to users across publisher websites, helping both publishers monetize their sites and advertisers reach target audiences.
Why Do We Think Twice About TBLA?
- Earnings per share have contracted by 41.7% annually over the last three years, a headwind for returns as stock prices often echo long-term EPS performance
- Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 2,531.6 percentage points
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
At $3.41 per share, Taboola trades at 6.5x forward EV-to-EBITDA. To fully understand why you should be careful with TBLA, check out our full research report (it’s free).
Banc of California (BANC)
One-Year Revenue Growth: +128%
Originally established in 1941 and now operating with a tech-forward approach that includes its SmartStreet platform for homeowner associations, Banc of California (NYSE: BANC) is a California-based bank holding company that provides banking services to small and middle-market businesses, entrepreneurs, and individuals.
Why Are We Hesitant About BANC?
- Loans are facing significant end-market challenges during this cycle as net interest income has declined by 1.3% annually over the last five years
- Products and services are facing significant credit quality challenges during this cycle as tangible book value per share has declined by 3.9% annually over the last five years
- Push for growth has led to negative returns on capital, signaling value destruction
Banc of California’s stock price of $15.10 implies a valuation ratio of 0.8x forward P/B. Check out our free in-depth research report to learn more about why BANC doesn’t pass our bar.
One Growth Stock to Watch:
Annaly Capital Management (NLY)
One-Year Revenue Growth: +399%
Operating as a real estate investment trust since 1996 with a focus on generating income from interest rate spreads, Annaly Capital Management (NYSE: NLY) is a diversified capital manager that invests in agency mortgage-backed securities, residential mortgage loans, and mortgage servicing rights.
Why Are We Fans of NLY?
- Projected net interest income growth of 434% for the next 12 months is above its five-year trend, pointing to accelerating demand
- Earnings growth has trumped its peers over the last two years as its EPS has compounded at 49.7% annually
- Acceptable return on equity suggests management generated shareholder value by investing in profitable projects
Annaly Capital Management is trading at $20.45 per share, or 1.1x forward P/B. Is now the right time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
Trump’s April 2024 tariff bombshell triggered a massive market selloff, but stocks have since staged an impressive recovery, leaving those who panic sold on the sidelines.
Take advantage of the rebound by checking out our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today
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