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.
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 with significant upside potential and one whose momentum may slow.
One Growth Stock to Sell:
Seagate Technology (STX)
One-Year Revenue Growth: +36.3%
The developer of the original 5.25inch hard disk drive, Seagate (NASDAQ: STX) is a leading producer of data storage solutions, including hard drives and Solid State Drives (SSDs) used in PCs and data centers.
Why Does STX Worry Us?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 3.8% annually over the last five years
- Gross margin of 28.4% is below its competitors, leaving less money to invest in areas like marketing and R&D
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 8.3% for the last two years
Seagate Technology’s stock price of $93.08 implies a valuation ratio of 10.4x forward P/E. Check out our free in-depth research report to learn more about why STX doesn’t pass our bar.
Two Growth Stocks to Watch:
HubSpot (HUBS)
One-Year Revenue Growth: +21.1%
Started in 2006 by two MIT grad students, HubSpot (NYSE: HUBS) is a software-as-a-service platform that helps small and medium-sized businesses market themselves, sell, and get found on the internet.
Why Does HUBS Stand Out?
- ARR trends over the last year show it’s maintaining a steady flow of long-term contracts that contribute positively to its revenue predictability
- Prominent and differentiated software leads to a best-in-class gross margin of 85%
- Operating profits increased over the last year as the company gained some leverage on its fixed costs and became more efficient
HubSpot is trading at $632 per share, or 11.1x forward price-to-sales. Is now the right time to buy? See for yourself in our comprehensive research report, it’s free.
Confluent (CFLT)
One-Year Revenue Growth: +24.1%
Started in 2014 by the team of engineers at LinkedIn who originally built it as an internal tool, Confluent (NASDAQ: CFLT) provides infrastructure software for organizations that makes it easy and fast to collect and move large amounts of data between different systems.
Why Do We Like CFLT?
- Winning new contracts that can potentially increase in value as its billings growth has averaged 27.9% over the last year
- Platform plays a pivotal role in customer workflows as its net revenue retention rate punches in at 117%
- Projected revenue growth of 17.4% for the next 12 months suggests its momentum from the last three years will persist
At $19.80 per share, Confluent trades at 5.6x forward price-to-sales. Is now a good time to buy? Find out in our full research report, it’s free.
Stocks That Overcame Trump’s 2018 Tariffs
Market indices reached historic highs following Donald Trump’s presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth.
While this has caused many investors to adopt a "fearful" wait-and-see approach, we’re leaning into our best ideas that can grow regardless of the political or macroeconomic climate. Take advantage of Mr. Market by checking out our Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.
Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like United Rentals (+322% five-year return). Find your next big winner with StockStory today for free.
