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.
The risks that can come from buying these assets is precisely why we started StockStory – to isolate the long-term winners from the losers so you can invest with confidence. On that note, here is one growth stock with significant upside potential and two that could be down big.
One-Year Revenue Growth: +25.3%
Founded in 1983 in California, Mission Produce (NASDAQ:AVO) grows, packages, and distributes avocados.
Why Do We Pass on AVO?
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Revenue base of $1.43 billion puts it at a disadvantage compared to larger competitors exhibiting economies of scale
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Projected sales decline of 7.1% for the next 12 months points to a tough demand environment ahead
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Commoditized products, bad unit economics, and high competition are reflected in its low gross margin of 11.1%
Mission Produce is trading at $12.21 per share, or 18x forward P/E. Check out our free in-depth research report to learn more about why AVO doesn’t pass our bar.
One-Year Revenue Growth: +30.4%
Pioneering the field of “liquid biopsy” with technology that can identify cancer-specific genetic mutations from a simple blood draw, Guardant Health (NASDAQ:GH) develops blood tests that detect and monitor cancer by analyzing tumor DNA in the bloodstream, helping doctors make treatment decisions without invasive biopsies.
Why Are We Hesitant About GH?
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Earnings per share fell by 18.5% annually over the last five years while its revenue grew, partly because it diluted shareholders
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Negative free cash flow raises questions about the return timeline for its investments
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Negative earnings profile makes it challenging to secure favorable financing terms from lenders
Guardant Health’s stock price of $94 implies a valuation ratio of 10.4x forward price-to-sales. If you’re considering GH for your portfolio, see our FREE research report to learn more.
One-Year Revenue Growth: +15.4%
Launched by Reed Hastings as a DVD mail rental company until its famous pivot to streaming in 2007, Netflix (NASDAQ: NFLX) is a pioneering streaming content platform.
Why Is NFLX a Top Pick?
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Global Streaming Paid Memberships are rising, meaning the company can increase revenue without incurring additional customer acquisition costs if it can cross-sell additional products and features
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Share buybacks catapulted its annual earnings per share growth to 29%, which outperformed its revenue gains over the last three years
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Free cash flow margin jumped by 18.4 percentage points over the last few years, giving the company more resources to pursue growth initiatives, repurchase shares, or pay dividends