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Growth is oxygen. But when it evaporates, the consequences can be extreme - ask anyone who bought Cisco in the Dot-Com Bubble (Nvidia?) or newer investors who lived through the 2020 to 2022 COVID cycle.
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. That said, here is one growth stock with significant upside potential and two that could be down big.
Two Growth Stocks to Sell:
The ONE Group (STKS)
One-Year Revenue Growth: +139%
Doubling as a hospitality services provider for hotels and resorts, The One Group Hospitality (NASDAQ:STKS) is an upscale restaurant company that operates STK Steakhouse and Kona Grill.
Why Is STKS Risky?
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Weak same-store sales trends over the past two years suggest there may be few opportunities in its core markets to open new restaurants
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Earnings per share have dipped by 17.6% annually over the past five years, which is concerning because stock prices follow EPS over the long term
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7× net-debt-to-EBITDA ratio shows it’s overleveraged and increases the probability of shareholder dilution if things turn unexpectedly
The ONE Group is trading at $4.35 per share, or 1.3x forward EV-to-EBITDA. To fully understand why you should be careful with STKS, check out our full research report (it’s free).
LifeStance Health Group (LFST)
One-Year Revenue Growth: +16.3%
With over 6,600 licensed mental health professionals treating more than 880,000 patients annually, LifeStance Health (NASDAQ:LFST) provides outpatient mental health services through a network of clinicians offering psychiatric evaluations, psychological testing, and therapy across 33 states.
Why Are We Hesitant About LFST?
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Subscale operations are evident in its revenue base of $1.28 billion, meaning it has fewer distribution channels than its larger rivals
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Cash-burning history makes us doubt the long-term viability of its business model
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Negative returns on capital show that some of its growth strategies have backfired
At $5.79 per share, LifeStance Health Group trades at 76.2x forward P/E. Dive into our free research report to see why there are better opportunities than LFST.
One Growth Stock to Watch:
Pinterest (PINS)
One-Year Revenue Growth: +17.8%
Created with the idea of virtually replacing paper catalogues, Pinterest (NYSE: PINS) is an online image and social discovery platform.
Why Are We Fans of PINS?
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Monthly Active Users have grown by 10.4% annually, allowing for more profitable cross-selling opportunities if it can build complementary products and features
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Healthy EBITDA margin of 27% shows it’s a well-run company with efficient processes
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PINS is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders