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.
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 is one growth stock expanding its competitive advantage and two whose momentum may slow.
Two Growth Stocks to Sell:
Penguin Solutions (PENG)
One-Year Revenue Growth: +16.9%
Based in the US, Penguin Solutions (NASDAQ:PENG) is a diversified semiconductor company offering memory, digital, and LED products.
Why Do We Avoid PENG?
- Sales tumbled by 2.5% annually over the last two years, showing market trends are working against its favor during this cycle
- Competitive supply chain dynamics and steep production costs are reflected in its low gross margin of 29.1%
- Low free cash flow margin of 6.2% for the last two years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
At $21.19 per share, Penguin Solutions trades at 10.1x forward P/E. To fully understand why you should be careful with PENG, check out our full research report (it’s free for active Edge members).
Graham Corporation (GHM)
One-Year Revenue Growth: +16%
Founded when its founder patented a unique design for a vacuum system used in the sugar refining process, Graham (NYSE:GHM) provides vacuum and heat transfer equipment for the energy, petrochemical, refining, and chemical sectors.
Why Are We Cautious About GHM?
- Responsiveness to unforeseen market trends is restricted due to its substandard operating margin profitability
- ROIC of 3.1% reflects management’s challenges in identifying attractive investment opportunities
- Limited cash reserves may force the company to seek unfavorable financing terms that could dilute shareholders
Graham Corporation’s stock price of $59.49 implies a valuation ratio of 39.8x forward P/E. Dive into our free research report to see why there are better opportunities than GHM.
One Growth Stock to Buy:
Zscaler (ZS)
One-Year Revenue Growth: +23.3%
Pioneering the "zero trust" approach that has fundamentally changed enterprise network security, Zscaler (NASDAQ:ZS) provides a cloud-based security platform that connects users, devices, and applications securely without traditional network-based security hardware.
Why Should You Buy ZS?
- ARR trends over the last year show it’s maintaining a steady flow of long-term contracts that contribute positively to its revenue predictability
- Estimated revenue growth of 22.6% for the next 12 months implies its momentum over the last two years will continue
- Robust free cash flow margin of 27.2% gives it many options for capital deployment
Zscaler is trading at $331.49 per share, or 15.8x forward price-to-sales. Is now a good time to buy? See for yourself in our in-depth research report, it’s free for active Edge members.
High-Quality Stocks for All Market Conditions
Donald Trump’s April 2025 "Liberation Day" tariffs sent markets into a tailspin, but stocks have since rebounded strongly, proving that knee-jerk reactions often create the best buying opportunities.
The smart money is already positioning for the next leg up. Don’t miss out on the recovery - check out our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 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 for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today
StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.