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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.

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. On that note, here are two growth stocks with significant upside potential and one climbing an uphill battle.

One Growth Stock to Sell:

Grid Dynamics (GDYN)

One-Year Revenue Growth: +18.7%

With engineering centers across the Americas, Europe, and India serving Fortune 1000 companies, Grid Dynamics (NASDAQ:GDYN) provides technology consulting, engineering, and analytics services to help large enterprises modernize their technology systems and business processes.

Why Does GDYN Fall Short?

1. Smaller revenue base of $371.2 million means it hasn’t achieved the economies of scale that some industry juggernauts enjoy

2. Performance over the past five years shows its incremental sales were much less profitable, as its earnings per share fell by 7.9% annually

3. Negative returns on capital show that some of its growth strategies have backfired

Grid Dynamics is trading at $15.11 per share, or 38.7x forward P/E. If you’re considering GDYN for your portfolio, see our FREE research report to learn more.

Two Growth Stocks to Watch:

AppLovin (APP)

One-Year Revenue Growth: +41.6%

Co-founded by Adam Foroughi, who was frustrated with not being able to find a good solution to market his own dating app, AppLovin (NASDAQ:APP) is both a mobile game studio and provider of marketing and monetization tools for mobile app developers.

Why Is APP Interesting?

1. Well-designed software integrates seamlessly with other workflows, enabling swift payback periods on marketing expenses and customer growth at scale

2. Excellent operating margin of 42.8% highlights the efficiency of its business model, and it turbocharged its profits by achieving some fixed cost leverage

3. APP is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders

At $346.80 per share, AppLovin trades at 19.5x forward price-to-sales. Is now a good time to buy? Find out in our full research report, it’s free.

Quanta (PWR)

One-Year Revenue Growth: +15.8%

A construction engineering services company, Quanta (NYSE:PWR) provides infrastructure solutions to a variety of sectors, including energy and communications.

Why Should You Buy PWR?

1. Demand is greater than supply as the company’s 23.1% average backlog growth over the past two years shows it’s securing new contracts and accumulating more orders than it can fulfill

2. Sales outlook for the upcoming 12 months implies the business will stay on its desirable two-year growth trajectory

3. Earnings per share have massively outperformed its peers over the last two years, increasing by 22.4% annually