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.
Luckily for you, our job at StockStory is to help you avoid short-term fads by pointing you toward high-quality businesses that can generate sustainable long-term growth. On that note, here are two growth stocks expanding their competitive advantages and one that could be down big.
One Growth Stock to Sell:
C3.ai (AI)
One-Year Revenue Growth: +25.3%
Founded in 2009 by enterprise software veteran Tom Seibel, C3.ai (NYSE: AI) provides software that makes it easy for organizations to add artificial intelligence technology to their applications.
Why Are We Hesitant About AI?
- Annual revenue growth of 15.5% over the last three years was below our standards for the software sector
- Customer acquisition costs take a while to recoup, making it difficult to justify sales and marketing investments that could increase revenue
- Suboptimal cost structure is highlighted by its history of operating margin losses
C3.ai’s stock price of $23.60 implies a valuation ratio of 6.8x forward price-to-sales. Read our free research report to see why you should think twice about including AI in your portfolio.
Two Growth Stocks to Watch:
CAVA (CAVA)
One-Year Revenue Growth: +32.1%
Starting from a single Washington, D.C. location, CAVA (NYSE: CAVA) operates a fast-casual restaurant chain offering customizable Mediterranean-inspired dishes.
Why Is CAVA on Our Radar?
- Aggressive strategy of rolling out new restaurants to gobble up whitespace is prudent given its same-store sales growth
- Same-store sales growth averaged 13.8% over the past two years, showing it’s bringing new and repeat diners into its restaurants
- Free cash flow margin increased by 7.9 percentage points over the last year, giving the company more capital to invest or return to shareholders
CAVA is trading at $87.50 per share, or 144.6x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
e.l.f. Beauty (ELF)
One-Year Revenue Growth: +28.3%
Short for "eyes, lips, face", e.l.f. Beauty (NYSE: ELF) is a developer of high-quality beauty products at accessible price points.
Why Is ELF Interesting?
- Market share has increased over the last three years as its 49.6% annual revenue growth was exceptional
- Products command premium prices and lead to a best-in-class gross margin of 71%
- Earnings growth has massively outpaced its peers over the last three years as its EPS has compounded at 58.6% annually
At $121 per share, e.l.f. Beauty trades at 33.8x forward P/E. Is now the right time to buy? See for yourself in our in-depth research report, it’s free.
High-Quality Stocks for All Market Conditions
Donald Trump’s April 2025 "Liberation Day" tariffs sent markets into a tailspin, but stocks have since rebounded strongly, proving that knee-jerk reactions often create the best buying opportunities.
The smart money is already positioning for the next leg up. Don’t miss out on the recovery - check 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-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today for free.
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