Growth is oxygen. But when it evaporates, the consequences can be severe - ask anyone who bought Cisco in the Dot-Com Bubble or newer investors who lived through the 2020 to 2022 COVID cycle.
Deciphering which businesses can sustain their high growth rates is a challenge for even the most seasoned professionals, which is why we started StockStory. That said, here are two growth stocks expanding their competitive advantages and one climbing an uphill battle.
One Growth Stock to Sell:
Quanex (NX)
One-Year Revenue Growth: +47.7%
Starting in the seamless tube industry, Quanex (NYSE: NX) manufactures building products like window, door, kitchen, and bath cabinet components.
Why Does NX Give Us Pause?
- Performance over the past two years shows its incremental sales were much less profitable, as its earnings per share fell by 5.4% annually
- Free cash flow margin shrank by 9.9 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
- Waning returns on capital imply its previous profit engines are losing steam
Quanex is trading at $21.22 per share, or 7.8x forward P/E. Read our free research report to see why you should think twice about including NX in your portfolio.
Two Growth Stocks to Watch:
Aris Water (ARIS)
One-Year Revenue Growth: +16.4%
Primarily serving the oil and gas industry, Aris Water (NYSE: ARIS) is a provider of water handling and recycling solutions.
Why Will ARIS Outperform?
- Annual revenue growth of 23.8% over the last five years was superb and indicates its market share increased during this cycle
- Incremental sales over the last two years have been highly profitable as its earnings per share increased by 30.4% annually, topping its revenue gains
- Free cash flow margin expanded by 38.4 percentage points over the last five years, providing additional flexibility for investments and share buybacks/dividends
At $23.69 per share, Aris Water trades at 14.7x forward P/E. Is now the time to initiate a position? See for yourself in our in-depth research report, it’s free.
Intuitive Surgical (ISRG)
One-Year Revenue Growth: +20.8%
Pioneering minimally invasive surgery since its first da Vinci system was FDA-cleared in 2000, Intuitive Surgical (NASDAQ: ISRG) develops and manufactures robotic-assisted surgical systems that enable minimally invasive procedures across various medical specialties.
Why Should ISRG Be on Your Watchlist?
- System Placement averaged 11.4% growth over the past two years and imply healthy demand for its products
- Estimated revenue growth of 14.2% for the next 12 months implies its momentum over the last two years will continue
- Earnings per share grew by 17.7% annually over the last five years and trumped its peers
Intuitive Surgical’s stock price of $482.68 implies a valuation ratio of 57.5x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
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 6 Stocks for this week. 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 Exlservice (+354% 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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