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.
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 expanding their competitive advantages and one that could be down big.
One-Year Revenue Growth: +17.5%
With a nationwide footprint spanning 671 clinics across 42 states, U.S. Physical Therapy (NYSE:USPH) operates a network of outpatient physical therapy clinics and provides industrial injury prevention services to employers across the United States.
Why Are We Wary of USPH?
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Subscale operations are evident in its revenue base of $758.7 million, meaning it has fewer distribution channels than its larger rivals
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8.6 percentage point decline in its free cash flow margin over the last five years reflects the company’s increased investments to defend its market position
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Waning returns on capital imply its previous profit engines are losing steam
U.S. Physical Therapy is trading at $75.58 per share, or 26.1x forward P/E. Dive into our free research report to see why there are better opportunities than USPH.
One-Year Revenue Growth: +26.6%
Named after a database the founders had to painstakingly look after at their previous company, Datadog (NASDAQ:DDOG) provides a software platform that helps organizations monitor and secure their cloud applications, infrastructure, and services.
Why Is DDOG a Good Business?
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Customers view its software as mission-critical to their operations as its ARR has averaged 26.5% growth over the last year
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Forecasted revenue growth of 21.6% for the next 12 months indicates its momentum over the last two years is sustainable
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Well-designed software integrates seamlessly with other workflows, enabling swift payback periods on marketing expenses and customer growth at scale
At $191.31 per share, Datadog trades at 17.7x forward price-to-sales. Is now the time to initiate a position? Find out in our full research report, it’s free for active Edge members.
One-Year Revenue Growth: +45.4%
Founded in 1876 by a Civil War veteran and pharmacist frustrated with the poor quality of medicines, Eli Lilly (NYSE:LLY) discovers, develops, and manufactures pharmaceutical products for conditions including diabetes, obesity, cancer, immunological disorders, and neurological diseases.