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.
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. That said, here are two growth stocks expanding their competitive advantages and one that could be down big.
One Growth Stock to Sell:
DNOW (DNOW)
One-Year Revenue Growth: +18.8%
Spun off from National Oilwell Varco, DNOW (NYSE: DNOW) provides distribution and supply chain solutions for the energy and industrial end markets.
Why Are We Wary of DNOW?
- Responsiveness to unforeseen market trends is restricted due to its substandard operating margin profitability
- Revenue growth over the past two years was nullified by the company’s new share issuances as its earnings per share fell by 3.7% annually
- Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
At $11.76 per share, DNOW trades at 15.9x forward P/E. To fully understand why you should be careful with DNOW, check out our full research report (it’s free).
Two Growth Stocks to Watch:
Globus Medical (GMED)
One-Year Revenue Growth: +16.7%
With operations spanning 64 countries and a portfolio of over 10 new products launched in 2023 alone, Globus Medical (NYSE: GMED) develops and sells implantable devices, surgical instruments, and technology solutions for spine, orthopedic, and neurosurgical procedures.
Why Are We Positive On GMED?
- Business is well-positioned no matter the global macroeconomic backdrop as its constant currency revenue growth averaged 22.3% over the past two years
- Earnings per share grew by 22.8% annually over the last five years, massively outpacing its peers
- Impressive free cash flow profitability enables the company to fund new investments or reward investors with share buybacks/dividends
Globus Medical’s stock price of $86.97 implies a valuation ratio of 19.4x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
IMAX (IMAX)
One-Year Revenue Growth: +16.5%
Originally developed for World Expo '67 in Montreal as an innovative projection system, IMAX (NYSE: IMAX) provides proprietary large-format cinema technology and systems that deliver immersive movie experiences with enhanced image quality and sound.
Why Is IMAX a Good Business?
- Annual revenue growth of 24.5% over the past five years was outstanding, reflecting market share gains this cycle
- Free cash flow margin jumped by 24.3 percentage points over the last five years, giving the company more resources to pursue growth initiatives, repurchase shares, or pay dividends
- Returns on capital are increasing as management’s prior bets are starting to bear fruit
IMAX is trading at $39.61 per share, or 23.4x forward P/E. Is now the time to initiate a position? See for yourself in our in-depth research report, it’s free.
Stocks We Like Even More
ONE MORE THING: Top 6 Stocks for This Week. This market is separating quality stocks from expensive ones fast. AI taking down whole sectors with no warning. In a rotation this fast, you need more than a list of good companies.
Our AI system flagged Palantir before it ran 1,662%. AppLovin before it ran 753%. Nvidia before it ran 1,178%. Each week it produces 6 new names that pass the same tests. Get Our Top 6 Stocks for Free HERE.
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today.
