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.
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 is one growth stock expanding its competitive advantage and two whose momentum may slow.
Two Growth Stocks to Sell:
Penguin Solutions (PENG)
One-Year Revenue Growth: +16.9%
Based in the US, Penguin Solutions (NASDAQ: PENG) is a diversified semiconductor company offering memory, digital, and LED products.
Why Do We Avoid PENG?
- Sales tumbled by 2.5% annually over the last two years, showing market trends are working against its favor during this cycle
- Competitive supply chain dynamics and steep production costs are reflected in its low gross margin of 29.1%
- Low free cash flow margin of 6.2% for the last two years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
At $21.19 per share, Penguin Solutions trades at 10.1x forward P/E. To fully understand why you should be careful with PENG, check out our full research report (it’s free for active Edge members).
Graham Corporation (GHM)
One-Year Revenue Growth: +16%
Founded when its founder patented a unique design for a vacuum system used in the sugar refining process, Graham (NYSE: GHM) provides vacuum and heat transfer equipment for the energy, petrochemical, refining, and chemical sectors.
Why Are We Cautious About GHM?
- Responsiveness to unforeseen market trends is restricted due to its substandard operating margin profitability
- ROIC of 3.1% reflects management’s challenges in identifying attractive investment opportunities
- Limited cash reserves may force the company to seek unfavorable financing terms that could dilute shareholders
Graham Corporation’s stock price of $59.49 implies a valuation ratio of 39.8x forward P/E. Dive into our free research report to see why there are better opportunities than GHM.
One Growth Stock to Buy:
Zscaler (ZS)
One-Year Revenue Growth: +23.3%
Pioneering the "zero trust" approach that has fundamentally changed enterprise network security, Zscaler (NASDAQ: ZS) provides a cloud-based security platform that connects users, devices, and applications securely without traditional network-based security hardware.
Why Should You Buy ZS?
- ARR trends over the last year show it’s maintaining a steady flow of long-term contracts that contribute positively to its revenue predictability
- Estimated revenue growth of 22.6% for the next 12 months implies its momentum over the last two years will continue
- Robust free cash flow margin of 27.2% gives it many options for capital deployment
Zscaler is trading at $331.49 per share, or 15.8x forward price-to-sales. Is now a good time to buy? See for yourself in our in-depth research report, it’s free for active Edge members.
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 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-micro-cap company Kadant (+351% 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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