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.
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. Keeping that in mind, here is one growth stock expanding its competitive advantage and two whose momentum may slow.
Two Growth Stocks to Sell:
Herc (HRI)
One-Year Revenue Growth: +28.4%
Formerly a subsidiary of Hertz Corporation and with a logo that still bears some similarities to its former parent, Herc Holdings (NYSE:HRI) provides equipment rental and related services to a wide range of industries.
Why Are We Hesitant About HRI?
- Expenses have increased as a percentage of revenue over the last five years as its operating margin fell by 7.2 percentage points
- Revenue growth over the past two years was nullified by the company’s new share issuances as its earnings per share fell by 28% annually
- Diminishing returns on capital suggest its earlier profit pools are drying up
Herc’s stock price of $145.14 implies a valuation ratio of 21x forward P/E. Read our free research report to see why you should think twice about including HRI in your portfolio.
AMN Healthcare Services (AMN)
One-Year Revenue Growth: +19.9%
With a network of thousands of healthcare professionals ranging from nurses to physicians to executives, AMN Healthcare (NYSE:AMN) provides healthcare workforce solutions including temporary staffing, permanent placement, and technology platforms for hospitals and healthcare facilities across the United States.
Why Should You Sell AMN?
- Declining travelers on assignment over the past two years indicate demand is soft and that the company may need to revise its strategy
- Earnings per share have contracted by 7.1% annually over the last five years, a headwind for returns as stock prices often echo long-term EPS performance
- Eroding returns on capital suggest its historical profit centers are aging
AMN Healthcare Services is trading at $30.96 per share, or 38.4x forward P/E. To fully understand why you should be careful with AMN, check out our full research report (it’s free).
One Growth Stock to Buy:
Microsoft (MSFT)
One-Year Revenue Growth: +17.9%
Originally named "Micro-soft" for microcomputer software when founded in 1975, Microsoft (NASDAQ:MSFT) is a global technology company that develops software, cloud services, devices, and AI solutions for consumers, businesses, and organizations worldwide.
Why Is MSFT a Top Pick?
- Microsoft is one of the great brands not just in tech but all of business. It produces mission-critical software and bundles it together, resulting in cream-of-the-crop gross margins.
- The company’s elite unit economics lead to robust profit margins that improve over time. This speaks to the scale advantages and operating efficiency across its diverse portfolio, which spans everything from Office and Azure to Minecraft.
- Microsoft has a virtuous cycle of returns. Its dominant market position enables it to generate strong free cash flow, and it reinvests these funds into promising ventures that further strengthen its competitive moat.
At $411.09 per share, Microsoft trades at 22.5x forward price-to-earnings. Is now the time to initiate a position? Find out in our full research report, it’s free.
Stocks We Like Even More
ONE MORE THING: Top 5 Growth Stocks. The biggest stock winners almost always had one thing in common before they ran. Revenue growing like crazy. Meta. CrowdStrike. Broadcom. Our AI flagged all three. They returned 315%, 314%, and 455%, respectively.
Find out which 5 stocks it’s flagging this month — FREE. Get Our Top 5 Growth 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.