Growth is oxygen. But when it evaporates, the consequences can be severe – ask anyone who bought Cisco in the Dot-Com Bubble or newer investors who lived through the 2020 to 2022 COVID cycle.
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 climbing an uphill battle.
One Growth Stock to Sell:
TowneBank (TOWN)
One-Year Revenue Growth: +20.3%
Founded in 1998 with a commitment to community-centered banking in the Hampton Roads region, TowneBank (NASDAQ:TOWN) is a community-focused financial institution providing banking, lending, and wealth management services to individuals and businesses in Virginia and North Carolina.
Why Are We Wary of TOWN?
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5.2% annual revenue growth over the last five years was slower than its banking peers
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Day-to-day expenses have swelled relative to revenue over the last five years as its efficiency ratio increased by 8.5 percentage points
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Muted 4% annual tangible book value per share growth over the last two years shows its capital generation lagged behind its banking peers
At $34.22 per share, TowneBank trades at 1x forward P/B. Read our free research report to see why you should think twice about including TOWN in your portfolio, it’s free.
Two Growth Stocks to Watch:
Boot Barn (BOOT)
One-Year Revenue Growth: +17.5%
With a strong store presence in Texas, California, Florida, and Oklahoma, Boot Barn (NYSE:BOOT) is a western-inspired apparel and footwear retailer.
Why Are We Positive On BOOT?
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Fast expansion of new stores to reach markets with few or no locations is justified by its same-store sales growth
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Locations open for at least a year are seeing increased demand as same-store sales have averaged 4.8% growth over the past two years
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Exciting sales outlook for the upcoming 12 months calls for 14.4% growth, an acceleration from its three-year trend
Boot Barn is trading at $145 per share, or 18.6x forward P/E. Is now a good time to buy? See for yourself in our comprehensive research report, it’s free.
HEICO (HEI)
One-Year Revenue Growth: +16.1%
Founded in 1957, HEICO (NYSE:HEI) manufactures and services aerospace and electronic components for commercial aviation, defense, space, and other industries.
Why Are We Bullish on HEI?
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Impressive 19.5% annual revenue growth over the last two years indicates it’s winning market share this cycle
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Earnings per share grew by 28.6% annually over the last two years and trumped its peers
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HEI is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders