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 is one growth stock where the best is yet to come and two facing an uphill battle.
Two growth stocks to sell:
Herc (HRI)
One-year revenue growth: +19.4%
Formerly a subsidiary of Hertz Corporation and with a logo that still bears some similarities to its former parent, Herc Holdings (NYSE: HRI) provides equipment rental and related services to a wide range of industries.
Why Does HRI Worry Us?
- Expenses have increased as a percentage of revenue over the last five years as its operating margin fell by 6.2 percentage points
- Issuance of new shares over the last two years caused its earnings per share to fall by 22.1% annually while its revenue grew
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
Herc’s stock price of $166.44 implies a valuation ratio of 13.3x forward P/E. To fully understand why you should be careful with HRI, check out our full research report (it’s free).
Antero Resources (AR)
One-year revenue growth: +27.3%
Holding roughly 521,000 net acres across West Virginia, Ohio, and Pennsylvania, Antero Resources (NYSE: AR) drills and produces natural gas, natural gas liquids, and oil from underground rock formations in the Appalachian Basin.
Why Do We Think Twice About AR?
- Annual revenue growth of 6.5% over the last five years was below our standards for the energy upstream and integrated energy sector
- Efficiency has decreased over the last five years as its EBITDA margin fell by 10.9 percentage points
At $42.08 per share, Antero Resources trades at 9.2x forward P/E. Read our free research report to see why you should think twice about including AR in your portfolio.
One growth stock to buy:
Keysight (KEYS)
One-year revenue growth: +25.5%
Spun off from Hewlett-Packard in 2014, Keysight (NYSE: KEYS) offers electronic measurement products for use in various sectors.
Why Should You Buy KEYS?
- Annual revenue growth of 14.7% over the past two years was outstanding, reflecting market share gains this cycle
- Share buybacks catapulted its annual earnings per share growth to 23.2%, which outperformed its revenue gains over the last two years
- Robust free cash flow margin of 21.4% gives it many options for capital deployment, and its growing cash flow gives it even more resources to deploy
Keysight is trading at $310.08 per share, or 24.4x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
Stocks we like even more
WHILE YOU’RE HERE: Top 9 Market-Beating Stocks. The best stocks don’t just beat the market once. They do it again. And again. Robust revenue growth, rising free cash flow, returns on capital that leave their competition in the dust. The market has already rewarded these businesses.
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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+271% between June 2020 and June 2025). Find your next big winner with StockStory today.
