Growth is a hallmark of all great companies, but the laws of gravity eventually take hold. Those who rode the COVID boom and ensuing tech selloff in 2022 will surely remember that the market’s punishment can be swift and severe when trajectories fall.
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 where the best is yet to come and one whose momentum may slow.
One Growth Stock to Sell:
Semtech (SMTC)
One-Year Revenue Growth: +22.2%
A public company since the late 1960s, Semtech (NASDAQ: SMTC) is a provider of analog and mixed-signal semiconductors used for Internet of Things systems and cloud connectivity.
Why Is SMTC Risky?
- Growth came at the expense of profits over the last five years as its operating margin losses have increased
- Low free cash flow margin of 6.5% declined over the last five years as its investments ramped, giving it little breathing room
- Negative returns on capital show management lost money while trying to expand the business, and its shrinking returns suggest its past profit sources are losing steam
At $70.25 per share, Semtech trades at 39.3x forward P/E. To fully understand why you should be careful with SMTC, check out our full research report (it’s free for active Edge members).
Two Growth Stocks to Watch:
HubSpot (HUBS)
One-Year Revenue Growth: +19%
Born from the idea that traditional interruptive marketing was becoming less effective, HubSpot (NYSE: HUBS) provides an integrated platform that helps businesses attract, engage, and manage customer relationships through marketing, sales, service, and content management tools.
Why Are We Fans of HUBS?
- Billings have averaged 21.3% growth over the last year, showing it’s securing new contracts that could potentially increase in value over time
- Sales outlook for the upcoming 12 months implies the business will stay on its desirable two-year growth trajectory
- Superior software functionality and low servicing costs result in a premier gross margin of 84.6%
HubSpot’s stock price of $461 implies a valuation ratio of 7.3x forward price-to-sales. Is now the right time to buy? Find out in our full research report, it’s free for active Edge members.
KLA Corporation (KLAC)
One-Year Revenue Growth: +23.9%
Formed by the 1997 merger of the two leading semiconductor yield management companies, KLA Corporation (NASDAQ: KLAC) is the leading supplier of equipment used to measure and inspect semiconductor chips.
Why Is KLAC a Good Business?
- Annual revenue growth of 15.9% over the past five years was outstanding, reflecting market share gains this cycle
- Offerings are mission-critical for businesses and result in a best-in-class gross margin of 60.5%
- Robust free cash flow margin of 30.9% gives it many options for capital deployment, and its improved cash conversion implies it’s becoming a less capital-intensive business
KLA Corporation is trading at $1,057 per share, or 30.4x forward P/E. Is now a good time to buy? See for yourself in our full research report, it’s free for active Edge members.
High-Quality Stocks for All Market Conditions
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 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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