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.

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 are two growth stocks expanding their competitive advantages and one that could be down big.

One Growth Stock to Sell:

C3.ai (AI)

One-Year Revenue Growth: +25.3%

Founded in 2009 by enterprise software veteran Tom Seibel, C3.ai (NYSE: AI) provides software that makes it easy for organizations to add artificial intelligence technology to their applications.

Why Are We Hesitant About AI?

1. Annual revenue growth of 15.5% over the last three years was below our standards for the software sector
2. Customer acquisition costs take a while to recoup, making it difficult to justify sales and marketing investments that could increase revenue
3. Suboptimal cost structure is highlighted by its history of operating margin losses

C3.ai’s stock price of $23.60 implies a valuation ratio of 6.8x forward price-to-sales. Read our free research report to see why you should think twice about including AI in your portfolio.

Two Growth Stocks to Watch:

CAVA (CAVA)

One-Year Revenue Growth: +32.1%

Starting from a single Washington, D.C. location, CAVA (NYSE: CAVA) operates a fast-casual restaurant chain offering customizable Mediterranean-inspired dishes.

Why Is CAVA on Our Radar?

1. Aggressive strategy of rolling out new restaurants to gobble up whitespace is prudent given its same-store sales growth
2. Same-store sales growth averaged 13.8% over the past two years, showing it’s bringing new and repeat diners into its restaurants
3. Free cash flow margin increased by 7.9 percentage points over the last year, giving the company more capital to invest or return to shareholders

CAVA is trading at $87.50 per share, or 144.6x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.

e.l.f. Beauty (ELF)

One-Year Revenue Growth: +28.3%

Short for "eyes, lips, face", e.l.f. Beauty (NYSE: ELF) is a developer of high-quality beauty products at accessible price points.

Why Is ELF Interesting?

1. Market share has increased over the last three years as its 49.6% annual revenue growth was exceptional
2. Products command premium prices and lead to a best-in-class gross margin of 71%
3. Earnings growth has massively outpaced its peers over the last three years as its EPS has compounded at 58.6% annually

At $121 per share, e.l.f. Beauty trades at 33.8x forward P/E. Is now the right time to buy? See for yourself in our in-depth research report, it’s free.

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 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.

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