Adam Hejl
3 min read
Growth is oxygen. But when it evaporates, the consequences can be severe – ask anyone who bought Cisco in the Dot-Com Bubble or newer investors who lived through the 2020 to 2022 COVID cycle.
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 are two growth stocks expanding their competitive advantages and one that could be down big.
One Growth Stock to Sell:
Affirm (AFRM)
One-Year Revenue Growth: +32.1%
Founded by PayPal co-founder Max Levchin with a mission to create honest financial products, Affirm (NASDAQ:AFRM) provides a payment network that allows consumers to make purchases and pay for them over time with transparent, flexible installment loans.
Why Does AFRM Give Us Pause?
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Push for growth has led to negative returns on capital, signaling value destruction
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6× net-debt-to-EBITDA ratio shows it’s overleveraged and increases the probability of shareholder dilution if things turn unexpectedly
At $76.33 per share, Affirm trades at 20.7x forward P/E. Dive into our free research report to see why there are better opportunities than AFRM.
Two Growth Stocks to Buy:
monday.com (MNDY)
One-Year Revenue Growth: +25.4%
With its colorful interface of boards, columns, and automation that replaced the chaos of spreadsheets, monday.com (NASDAQ:MNDY) is a cloud-based work operating system that helps teams manage projects, track tasks, and streamline workflows through customizable interfaces.
Why Will MNDY Outperform?
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ARR growth averaged 25.5% over the last year, showing customers are willing to take multi-year bets on its software
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Software is difficult to replicate at scale and leads to a best-in-class gross margin of 89.1%
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Well-designed software integrates seamlessly with other workflows, enabling swift payback periods on marketing expenses and customer growth at scale
monday.com’s stock price of $67.48 implies a valuation ratio of 2.3x forward price-to-sales. Is now a good time to buy? Find out in our full research report, it’s free.
Shift4 (FOUR)
One-Year Revenue Growth: +28.3%
Starting as a payment gateway provider in 1999 and now processing over $200 billion in annual payment volume, Shift4 Payments (NYSE:FOUR) provides integrated payment processing solutions and software that help businesses accept and manage transactions across in-store, online, and mobile channels.
Why Should You Buy FOUR?
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Annual revenue growth of 27.8% over the last two years was superb and indicates its market share increased during this cycle
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Performance over the past two years shows its incremental sales were extremely profitable, as its annual earnings per share growth of 34.1% outpaced its revenue gains
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Stellar return on equity showcases management’s ability to surface highly profitable business ventures
