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.
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 expanding its competitive advantage and two that could be down big.
Two Growth Stocks to Sell:
nLIGHT (LASR)
One-Year Revenue Growth: +31.6%
Founded by a former CEO and Harvard-educated entrepreneur Scott Keeneyn, nLIGHT (NASDAQ: LASR) offers semiconductor and fiber lasers to the industrial, aerospace & defense, and medical sectors.
Why Does LASR Give Us Pause?
- Muted 3.2% annual revenue growth over the last five years shows its demand lagged behind its industrials peers
- Cash burn makes us question whether it can achieve sustainable long-term growth
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
nLIGHT is trading at $71.30 per share, or 217.7x forward P/E. To fully understand why you should be careful with LASR, check out our full research report (it’s free).
Privia Health (PRVA)
One-Year Revenue Growth: +22.3%
Operating in 13 states and the District of Columbia with over 4,300 providers serving more than 4.8 million patients, Privia Health (NASDAQ: PRVA) is a technology-driven company that helps physicians optimize their practices, improve patient experiences, and transition to value-based care models.
Why Is PRVA Not Exciting?
- Revenue base of $2.12 billion puts it at a disadvantage compared to larger competitors exhibiting economies of scale
- Negative returns on capital show management lost money while trying to expand the business
At $20.55 per share, Privia Health trades at 19.1x forward P/E. Dive into our free research report to see why there are better opportunities than PRVA.
One Growth Stock to Watch:
Acuity Brands (AYI)
One-Year Revenue Growth: +17.6%
One of the pioneers of smart lights, Acuity (NYSE: AYI) designs and manufactures light fixtures and building management systems used in various industries.
Why Do We Like AYI?
- Offerings are mission-critical for businesses and lead to a stellar gross margin of 44.8%
- Share repurchases have amplified shareholder returns as its annual earnings per share growth of 18.1% exceeded its revenue gains over the last five years
- Stellar returns on capital showcase management’s ability to surface highly profitable business ventures
Acuity Brands’s stock price of $283.41 implies a valuation ratio of 14.1x 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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