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.
The risks that can come from buying these assets is precisely why we started StockStory - to isolate the long-term winners from the losers so you can invest with confidence. On that note, here is one growth stock with significant upside potential and two whose momentum may slow.
Two Growth Stocks to Sell:
Casella Waste Systems (CWST)
1-Year Revenue Growth: +23.2%
Starting with the founder picking up garbage with a pickup truck he purchased using savings from high school, Casella (NASDAQ:CWST) offers waste management services for businesses, residents, and the government.
Why Does CWST Fall Short?
- Core business is underperforming as its organic revenue has disappointed over the past two years, suggesting it might need acquisitions to stimulate growth
- Earnings per share fell by 10.1% annually over the last two years while its revenue grew, partly because it diluted shareholders
- Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
Casella Waste Systems’s stock price of $111.36 implies a valuation ratio of 111.1x forward price-to-earnings. If you’re considering CWST for your portfolio, see our FREE research report to learn more.
Champion Homes (SKY)
1-Year Revenue Growth: +22.5%
Founded in 1951, Champion Homes (NYSE:SKY) is a manufacturer of modular homes and buildings in North America.
Why Does SKY Give Us Pause?
- Flat unit sales over the past two years suggest it might have to lower prices to accelerate growth
- Issuance of new shares over the last two years caused its earnings per share to fall by 31.5% annually, even worse than its revenue declines
- Waning returns on capital imply its previous profit engines are losing steam
Champion Homes is trading at $103.11 per share, or 27.4x forward price-to-earnings. Check out our free in-depth research report to learn more about why SKY doesn’t pass our bar.
One Growth Stock to Watch:
Boston Scientific (BSX)
1-Year Revenue Growth: +17.6%
Founded in 1979, Boston Scientific (NYSE:BSX) is a medical device company that designs, manufactures, and sells a wide range of technologies used in minimally-invasive medical procedures.
Why Do We Watch BSX?
- Existing business lines can expand without risky acquisitions as its organic revenue growth averaged 14.4% over the past two years
- Sales outlook for the upcoming 12 months implies the business will stay on its desirable two-year growth trajectory
- Free cash flow margin increased by 4.3 percentage points over the last five years, giving the company more capital to invest or return to shareholders
At $104.40 per share, Boston Scientific trades at 36.9x forward price-to-earnings. Is now the right time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
The elections are now behind us. With rates dropping and inflation cooling, many analysts expect a breakout market - and we’re zeroing in on the stocks that could benefit immensely.
Take advantage of the rebound 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.
