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.
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 where the best is yet to come and one whose momentum may slow.
One Growth Stock to Sell:
NESR (NESR)
One-Year Revenue Growth: +23.5%
Operating across 16 countries from Algeria to Indonesia, NESR (NASDAQ:NESR) provides oilfield services like hydraulic fracturing, cementing, and drilling to oil and gas companies.
Why Does NESR Worry Us?
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Smaller revenue base of $1.62 billion means it hasn’t achieved the economies of scale that some industry juggernauts enjoy
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Gross margin of 12.8% is below its competitors, leaving less money to invest in exploration and production
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Costs have risen faster than its revenue over the last five years, causing its EBITDA margin to decline by 74.1 percentage points
At $19.29 per share, NESR trades at 9.6x forward P/E. To fully understand why you should be careful with NESR, check out our full research report (it’s free).
Two Growth Stocks to Buy:
Shopify (SHOP)
One-Year Revenue Growth: +32.5%
Starting with just three people selling snowboards online in 2004, Shopify (NASDAQ:SHOP) provides a comprehensive platform that enables merchants of all sizes to create, manage and grow their businesses across multiple sales channels.
Why Should You Buy SHOP?
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Billings growth has averaged 33.1% over the last year, indicating a healthy pipeline of new contracts that should drive future revenue increases
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Notable projected revenue growth of 28.3% for the next 12 months hints at market share gains
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User-friendly software enables clients to ramp up spending quickly, leading to the speedy recovery of customer acquisition costs
Shopify is trading at $177.13 per share, or 13.1x forward price-to-sales. Is now a good time to buy? Find out in our full research report, it’s free.
Pinterest (PINS)
One-Year Revenue Growth: +16.6%
Created with the idea of virtually replacing paper catalogues, Pinterest (NYSE: PINS) is an online image and social discovery platform.
Why Is PINS a Good Business?
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Monthly Active Users have grown by 11% annually, allowing for more profitable cross-selling opportunities if it can build complementary products and features
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Additional sales over the last three years increased its profitability as the 36.4% annual growth in its earnings per share outpaced its revenue
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Impressive free cash flow profitability enables the company to fund new investments or reward investors with share buybacks/dividends, and its improved cash conversion implies it’s becoming a less capital-intensive business