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. That said, here are two growth stocks with significant upside potential and one climbing an uphill battle.
One Growth Stock to Sell:
DigitalOcean (DOCN)
One-Year Revenue Growth: +15.5%
Built for simplicity in a world of complex cloud solutions, DigitalOcean (NYSE: DOCN) provides a simplified cloud computing platform that enables developers and small businesses to quickly deploy and scale applications.
Why Does DOCN Give Us Pause?
- Net revenue retention rate of 99.8% shows it has a tough time retaining customers
- Bad unit economics and steep infrastructure costs are reflected in its gross margin of 59.9%, one of the worst among software companies
- Operating margin expanded by 5.8 percentage points over the last year as it scaled and became more efficient
DigitalOcean is trading at $53.60 per share, or 5.3x forward price-to-sales. Read our free research report to see why you should think twice about including DOCN in your portfolio.
Two Growth Stocks to Watch:
Uber (UBER)
One-Year Revenue Growth: +18.3%
Notoriously funded with $7.7 billion from the Softbank Vision Fund, Uber (NYSE: UBER) operates a platform of on-demand services such as ride-hailing, food delivery, and freight.
Why Do We Watch UBER?
- Has the opportunity to boost monetization through new features and premium offerings as its monthly active platform consumers have grown by 15.1% annually over the last two years
- Incremental sales over the last three years have been highly profitable as its earnings per share increased by 130% annually, topping its revenue gains
- Free cash flow margin grew by 17.5 percentage points over the last few years, giving the company more chips to play with
Uber’s stock price of $75.72 implies a valuation ratio of 15.1x forward EV/EBITDA. Is now the right time to buy? Find out in our full research report, it’s free.
AAR (AIR)
One-Year Revenue Growth: +15.4%
The first third-party MRO approved by the FAA for Safety Management System Requirements, AAR (NYSE: AIR) is a provider of aircraft maintenance services
Why Are We Positive On AIR?
- Annual revenue growth of 17% over the last two years was superb and indicates its market share increased during this cycle
- Expected revenue growth of 15.5% for the next year suggests its market share will rise
- Earnings per share have massively outperformed its peers over the last two years, increasing by 17.9% annually
At $110.53 per share, AAR trades at 23.4x forward P/E. Is now a good time to buy? See for yourself in our full 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 Kadant (+351% five-year return). Find your next big winner with StockStory today.
