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.
Deciphering which businesses can sustain their high growth rates is a challenge for even the most seasoned professionals, which is why we started StockStory. Keeping that in mind, here are two growth stocks where the best is yet to come and one that could be down big.
One Growth Stock to Sell:
Root (ROOT)
One-Year Revenue Growth: +59.8%
Pioneering a data-driven approach that rewards good driving habits, Root (NASDAQ: ROOT) is a technology-driven auto insurance company that uses mobile apps to acquire customers and data science to price policies based on individual driving behavior.
Why Does ROOT Give Us Pause?
- Annual book value per share declines of 158% for the past five years show its capital management struggled during this cycle
- Push for growth has led to negative returns on capital, signaling value destruction
Root is trading at $88.50 per share, or 4.2x forward P/B. Check out our free in-depth research report to learn more about why ROOT doesn’t pass our bar.
Two Growth Stocks to Buy:
Samsara (IOT)
One-Year Revenue Growth: +31.7%
From sensors on vehicles to AI-powered cameras that help prevent accidents, Samsara (NYSE: IOT) is a cloud-based Internet of Things platform that helps businesses improve the safety, efficiency, and sustainability of their physical operations.
Why Is IOT a Good Business?
- ARR growth averaged 33.3% over the last year, showing customers are willing to take multi-year bets on its software
- Expected revenue growth of 22.1% for the next year suggests its market share will rise
- Operating margin improvement of 19.2 percentage points over the last year demonstrates its ability to scale efficiently
Samsara’s stock price of $34.25 implies a valuation ratio of 11.8x forward price-to-sales. Is now the right time to buy? Find out in our full research report, it’s free.
MercadoLibre (MELI)
One-Year Revenue Growth: +35.8%
Originally started as an online auction platform, MercadoLibre (NASDAQ: MELI) is a one-stop e-commerce marketplace and fintech platform in Latin America.
Why Is MELI a Top Pick?
- Unique Active Buyers have increased by an average of 20.7% annually, giving it the potential for margin-accretive growth if it can develop valuable complementary products and features
- Strong engagement trends coupled with 15.5% annual growth in its average revenue per user demonstrate its platform’s stickiness with die-hard customers
- MELI is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders, and its recently improved profitability means it has even more resources to invest or distribute
At $2,367 per share, MercadoLibre trades at 23.8x forward EV/EBITDA. Is now a good time to buy? See for yourself in our full research report, it’s free.
Stocks We Like Even More
Donald Trump’s April 2025 "Liberation Day" tariffs sent markets into a tailspin, but stocks have since rebounded strongly, proving that knee-jerk reactions often create the best buying opportunities.
The smart money is already positioning for the next leg up. Don’t miss out on the recovery - check 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 183% over the last five years (as of March 31st 2025).
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-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today
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