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. Keeping that in mind, here is one growth stock expanding its competitive advantage and two that could be down big.
Two Growth Stocks to Sell:
Bandwidth (BAND)
One-Year Revenue Growth: +18.5%
Started in 1999 by David Morken who was later joined by Henry Kaestner as co-founder in 2001, Bandwidth (NASDAQ: BAND) provides thousands of customers with a software platform that uses its own global network to provide phone numbers, voice, and text connectivity.
Why Are We Out on BAND?
- Revenue increased by 13.9% annually over the last three years, acceptable on an absolute basis but tepid for a software company enjoying secular tailwinds
- Estimated sales growth of 2.8% for the next 12 months implies demand will slow from its three-year trend
- Gross margin of 38% reflects its high servicing costs
Bandwidth is trading at $14.10 per share, or 0.5x forward price-to-sales. To fully understand why you should be careful with BAND, check out our full research report (it’s free).
Roku (ROKU)
One-Year Revenue Growth: +17.3%
Spun out from Netflix, Roku (NASDAQ: ROKU) makes hardware players that offer access to various online streaming TV services.
Why Are We Hesitant About ROKU?
- Preference for prioritizing user growth over monetization has led to 1.4% annual drops in its average revenue per user
- Costs have risen faster than its revenue over the last few years, causing its EBITDA margin to decline by 7.1 percentage points
- Performance over the past three years shows its incremental sales were much less profitable, as its earnings per share fell by 34.6% annually
At $70.04 per share, Roku trades at 28.6x forward EV/EBITDA. Check out our free in-depth research report to learn more about why ROKU doesn’t pass our bar.
One Growth Stock to Buy:
QuinStreet (QNST)
One-Year Revenue Growth: +88.8%
Founded during the dot-com era in 1999 and specializing in high-intent consumer traffic, QuinStreet (NASDAQ: QNST) operates digital performance marketplaces that connect clients in financial and home services with consumers actively searching for their products.
Why Is QNST a Good Business?
- Impressive 31.4% annual revenue growth over the last two years indicates it’s winning market share this cycle
- Estimated revenue growth of 9.5% for the next 12 months implies its momentum over the last two years will continue
- Earnings growth has trumped its peers over the last two years as its EPS has compounded at 106% annually
QuinStreet’s stock price of $15.05 implies a valuation ratio of 14x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
Stocks We Like Even More
The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.
While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio by checking out our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 176% over the last five years.
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-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today for free.
