Growth is a hallmark of all great companies, but the laws of gravity eventually take hold. Those who rode the COVID boom and ensuing tech selloff in 2022 will surely remember that the market’s punishment can be swift and severe when trajectories fall.
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. Keeping that in mind, here is one growth stock expanding its competitive advantage and two whose momentum may slow.
Two Growth Stocks to Sell:
Compass (COMP)
One-Year Revenue Growth: +19.1%
Fueled by its mission to replace the "paper-driven, antiquated workflow" of buying a house, Compass (NYSE: COMP) is a digital-first company operating a residential real estate brokerage in the United States.
Why Are We Hesitant About COMP?
- Number of principal agents has disappointed over the past two years, indicating weak demand for its offerings
- Suboptimal cost structure is highlighted by its history of operating margin losses
- Poor free cash flow margin of 1.3% for the last two years limits its freedom to invest in growth initiatives, execute share buybacks, or pay dividends
Compass’s stock price of $6.40 implies a valuation ratio of 14.4x forward P/E. To fully understand why you should be careful with COMP, check out our full research report (it’s free).
iRhythm (IRTC)
One-Year Revenue Growth: +20.5%
Pioneering the shift from bulky, short-term heart monitors to sleek, wire-free patches, iRhythm Technologies (NASDAQ: IRTC) provides wearable cardiac monitoring devices and AI-powered analysis services that help physicians detect and diagnose heart rhythm disorders.
Why Does IRTC Worry Us?
- Earnings per share fell by 5.6% annually over the last five years while its revenue grew, partly because it diluted shareholders
- Cash-burning tendencies make us wonder if it can sustainably generate shareholder value
- 124× net-debt-to-EBITDA ratio makes lenders less willing to extend additional capital, potentially necessitating dilutive equity offerings
iRhythm is trading at $150.75 per share, or 84.5x forward EV-to-EBITDA. Dive into our free research report to see why there are better opportunities than IRTC.
One Growth Stock to Buy:
Cloudflare (NET)
One-Year Revenue Growth: +27.8%
Founded by two grad students of Harvard Business School, Cloudflare (NYSE: NET) is a software-as-a-service platform that helps improve the security, reliability, and loading times of internet applications.
Why Is NET a Good Business?
- Billings have averaged 27.9% growth over the last year, showing it’s securing new contracts that could potentially increase in value over time
- Expected revenue growth of 25.6% for the next year suggests its market share will rise
- Fast payback periods on sales and marketing expenses allow the company to invest heavily and onboard many customers concurrently
At $190.50 per share, Cloudflare trades at 29.6x forward price-to-sales. Is now the time to initiate a position? Find out in our full research report, it’s free.
Stocks We Like Even More
Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.
While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like 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. Find your next big winner with StockStory today. Find your next big winner with StockStory today
