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. Keeping that in mind, here are two growth stocks expanding their competitive advantages and one climbing an uphill battle.
One Growth Stock to Sell:
The Real Brokerage (REAX)
One-Year Revenue Growth: +81.3%
Founded in Toronto, Canada in 2014, The Real Brokerage (NASDAQ: REAX) is a technology-driven real estate brokerage firm combining a tech-centric model with an agent-centric philosophy.
Why Do We Think REAX Will Underperform?
- Poor expense management has led to operating margin losses
- Earnings per share fell by 9% annually over the last five years while its revenue grew, showing its incremental sales were much less profitable
- Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital
The Real Brokerage is trading at $4.13 per share, or 15.6x forward EV-to-EBITDA. Dive into our free research report to see why there are better opportunities than REAX.
Two Growth Stocks to Watch:
Duolingo (DUOL)
One-Year Revenue Growth: +39.1%
Founded by a Carnegie Mellon computer science professor and his Ph.D. student, Duolingo (NASDAQ: DUOL) is a mobile app helping people learn new languages.
Why Are We Bullish on DUOL?
- Monthly Active Users have increased by an average of 39.8% annually, giving it the potential for margin-accretive growth if it can develop valuable complementary products and features
- Additional sales over the last three years increased its profitability as the 178% annual growth in its earnings per share outpaced its revenue
- Robust free cash flow margin of 34.4% gives it many options for capital deployment, and its growing cash flow gives it even more resources to deploy
Duolingo’s stock price of $376.40 implies a valuation ratio of 60.9x forward EV/EBITDA. Is now the right time to buy? Find out in our full research report, it’s free.
Brinker International (EAT)
One-Year Revenue Growth: +19.8%
Founded by Norman Brinker in Dallas, Brinker International (NYSE: EAT) is a casual restaurant chain that operates the Chili’s, Maggiano’s Little Italy, and It’s Just Wings banners.
Why Do We Like EAT?
- Customers are lining up to eat at its restaurants as the company’s same-store sales growth averaged 11.7% over the past two years
- Operating profits increased over the last year as the company gained some leverage on its fixed costs and became more efficient
- Free cash flow margin expanded by 4.2 percentage points over the last year, providing additional flexibility for investments and share buybacks/dividends
At $165.50 per share, Brinker International trades at 17.9x forward P/E. Is now a good time to buy? See for yourself in our comprehensive 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 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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