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 is one growth stock with significant upside potential and two climbing an uphill battle.
Two Growth Stocks to Sell:
Rush Street Interactive (RSI)
One-Year Revenue Growth: +27%
Specializing in online casino gaming and sports betting, Rush Street Interactive (NYSE: RSI) is an operator of digital gaming platforms.
Why Do We Think Twice About RSI?
- Subpar operating margin of 2.6% constrains its ability to invest in process improvements or effectively respond to new competitive threats
- Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital
Rush Street Interactive’s stock price of $19.34 implies a valuation ratio of 51.4x forward P/E. If you’re considering RSI for your portfolio, see our FREE research report to learn more.
SoundHound AI (SOUN)
One-Year Revenue Growth: +101%
Founded in 2005, SoundHound AI (NASDAQ: SOUN) develops independent voice artificial intelligence solutions that enable businesses across various industries to offer customized conversational experiences to consumers.
Why Does SOUN Give Us Pause?
- Bad unit economics and steep infrastructure costs are reflected in its gross margin of 44.1%, one of the worst among software companies
- Operating margin fell by 39 percentage points over the last year as it prioritized growth over profits
- Cash-burning history makes us doubt the long-term viability of its business model
SoundHound AI is trading at $10.15 per share, or 25.5x forward price-to-sales. Check out our free in-depth research report to learn more about why SOUN doesn’t pass our bar.
One Growth Stock to Watch:
MACOM (MTSI)
One-Year Revenue Growth: +32.6%
Founded in the 1950s as Microwave Associates, a communications supplier to the US Army Signal Corp, today MACOM Technology Solutions (NASDAQ: MTSI) is a provider of analog chips used in optical, wireless, and satellite networks.
Why Could MTSI Be a Winner?
- Impressive 9.9% annual revenue growth over the last two years indicates it’s winning market share this cycle
- Projected revenue growth of 21.6% for the next 12 months is above its two-year trend, pointing to accelerating demand
- Earnings per share grew by 81.7% annually over the last five years and trumped its peers
At $136.31 per share, MACOM trades at 36.3x forward P/E. Is now the right time to buy? See for yourself in our in-depth research report, it’s free.
Stocks We Like Even More
Trump’s April 2025 tariff bombshell triggered a massive market selloff, but stocks have since staged an impressive recovery, leaving those who panic sold on the sidelines.
Take advantage of the rebound by checking 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-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today for free.
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