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 are three growth stocks climbing an uphill battle and some other opportunities you should consider instead.
One-Year Revenue Growth: +25.9%
Established in 1898, International Paper (NYSE:IP) produces containerboard, pulp, paper, and materials used in packaging and printing applications.
Why Do We Steer Clear of IP?
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Annual sales growth of 2.4% over the last five years lagged behind its industrials peers as its large revenue base made it difficult to generate incremental demand
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Free cash flow margin dropped by 11.5 percentage points over the last five years, implying the company became more capital intensive as competition picked up
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Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
International Paper’s stock price of $38.50 implies a valuation ratio of 22x forward P/E. If you’re considering IP for your portfolio, see our FREE research report to learn more.
One-Year Revenue Growth: +15.5%
Processing over 280 billion digital ad interactions daily through its AI-powered technology, Integral Ad Science (NASDAQ:IAS) provides a cloud-based platform that measures and verifies digital advertising across devices, channels, and formats to ensure ads are viewable, fraud-free, and brand-safe.
Why Is IAS Not Exciting?
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Revenue increased by 13.6% annually over the last two years, acceptable on an absolute basis but tepid for a software company enjoying secular tailwinds
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Operating profits and efficiency rose over the last year as it benefited from some fixed cost leverage
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Free cash flow margin is forecasted to shrink by 10.9 percentage points in the coming year, suggesting the company will consume more capital to keep up with its competitors
Integral Ad Science is trading at $10.27 per share, or 2.6x forward price-to-sales. Read our free research report to see why you should think twice about including IAS in your portfolio, it’s free for active Edge members.
One-Year Revenue Growth: +10.9%
Originally established in 1941 and now operating with a tech-forward approach that includes its SmartStreet platform for homeowner associations, Banc of California (NYSE:BANC) is a California-based bank holding company that provides banking services to small and middle-market businesses, entrepreneurs, and individuals.