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.
Deciphering which businesses can sustain their high growth rates is a challenge for even the most seasoned professionals, which is why we started StockStory. That said, here are two growth stocks expanding their competitive advantages and one that could be down big.
One Growth Stock to Sell:
SoundHound AI (SOUN)
One-Year Revenue Growth: +80%
Born from the idea that machines should understand human speech as naturally as people do, SoundHound AI (NASDAQ: SOUN) develops voice recognition and conversational intelligence technology that enables businesses to integrate voice assistants into their products and services.
Why Are We Wary of SOUN?
- Bad unit economics and steep infrastructure costs are reflected in its gross margin of 40.6%, one of the worst among software companies
- Competitive market means the company must spend more on sales and marketing to stand out even if the return on investment is low
- Cash-burning history makes us doubt the long-term viability of its business model
SoundHound AI’s stock price of $6.96 implies a valuation ratio of 12.1x forward price-to-sales. Dive into our free research report to see why there are better opportunities than SOUN.
Two Growth Stocks to Buy:
Quanta (PWR)
One-Year Revenue Growth: +21.1%
A construction engineering services company, Quanta (NYSE: PWR) provides infrastructure solutions to a variety of sectors, including energy and communications.
Why Is PWR a Good Business?
- Average backlog growth of 21.2% over the past two years shows it has a steady sales pipeline that will drive future orders
- Revenue outlook for the upcoming 12 months is outstanding and shows it’s on track to gain market share
- Earnings growth has trumped its peers over the last two years as its EPS has compounded at 26% annually
At $710.29 per share, Quanta trades at 47.3x forward P/E. Is now a good time to buy? See for yourself in our comprehensive research report, it’s free.
Ryan Specialty (RYAN)
One-Year Revenue Growth: +18.9%
Founded in 2010 by insurance industry veteran Patrick Ryan, Ryan Specialty (NYSE: RYAN) is a wholesale insurance broker and underwriting manager that helps retail brokers place complex or hard-to-place risks with insurance carriers.
Why Are We Backing RYAN?
- Annual revenue growth of 20.5% over the last two years was superb and indicates its market share increased during this cycle
- Earnings growth has massively outpaced its peers over the last four years as its EPS has compounded at 16.2% annually
- Robust free cash flow margin of 17.5% gives it many options for capital deployment
Ryan Specialty is trading at $35.65 per share, or 16.3x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
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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 Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today.
