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.
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 where the best is yet to come and two whose momentum may slow.
Two Growth Stocks to Sell:
Elastic (ESTC)
One-Year Revenue Growth: +17.3%
Built on the powerful open-source Elasticsearch technology that powers search functionality for thousands of websites worldwide, Elastic (NYSE: ESTC) provides a search and AI platform that helps organizations find insights from their data, monitor applications, and protect against security threats.
Why Are We Hesitant About ESTC?
- Average billings growth of 12.5% over the last year was subpar, suggesting it struggled to push its software and might have to lower prices to stimulate demand
- Estimated sales growth of 13.6% for the next 12 months implies demand will slow from its two-year trend
- Operating profits increased over the last year as the company gained some leverage on its fixed costs and became more efficient
Elastic is trading at $50.87 per share, or 2.7x forward price-to-sales. Dive into our free research report to see why there are better opportunities than ESTC.
Terex (TEX)
One-Year Revenue Growth: +17%
With humble beginnings as a dump truck company, Terex (NYSE: TEX) today manufactures lifting and material handling equipment designed to move and hoist heavy goods and materials.
Why Does TEX Give Us Pause?
- Muted 6.7% annual revenue growth over the last two years shows its demand lagged behind its industrials peers
- Issuance of new shares over the last two years caused its earnings per share to fall by 47.3% annually while its revenue grew
- Waning returns on capital imply its previous profit engines are losing steam
Terex’s stock price of $62.60 implies a valuation ratio of 12.4x forward P/E. Read our free research report to see why you should think twice about including TEX in your portfolio.
One Growth Stock to Buy:
Brown & Brown (BRO)
One-Year Revenue Growth: +29.2%
With roots dating back to 1939 and operations spanning 44 U.S. states and 14 countries, Brown & Brown (NYSE: BRO) is an insurance brokerage and risk management firm that markets and sells insurance products across property, casualty, and employee benefits sectors.
Why Are We Bullish on BRO?
- Estimated revenue growth of 11.6% for the next 12 months implies its momentum over the last two years will continue
- Earnings per share have massively outperformed its peers over the last five years, increasing by 18.5% annually
- BRO is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders
At $58.42 per share, Brown & Brown trades at 12.5x forward P/E. Is now the right time to buy? See for yourself in our in-depth research report, it’s free.
Stocks We Like Even More
WHILE YOU’RE HERE: Top 9 Market-Beating Stocks. The best stocks don't just beat the market once. They do it again. And again. Robust revenue growth, rising free cash flow, returns on capital that leave their competition in the dust. The market has already rewarded these businesses.
But our AI platform says the party isn't over. Find out which 9 stocks made the cut this week - FREE. Get Our Top 9 Market-Beating Stocks for Free HERE.
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today.
