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.
The risks that can come from buying these assets are precisely why we started StockStory — to isolate the long-term winners from the losers so you can invest with confidence. On that note, here is one growth stock with significant upside potential and two facing an uphill battle.
Two Growth Stocks to Sell:
Semtech (SMTC)
One-Year Revenue Growth: +17.8%
A public company since the late 1960s, Semtech (NASDAQ:SMTC) is a provider of analog and mixed-signal semiconductors used for Internet of Things systems and cloud connectivity.
Why Do We Think Twice About SMTC?
- Efficiency has decreased over the last five years as its operating margin fell by 16 percentage points
- 10.6 percentage point decline in its free cash flow margin over the last five years reflects the company’s increased investments to defend its market position
- Push for growth has led to negative returns on capital, signaling value destruction
Semtech is trading at $134.75 per share, or 27.1x forward P/E. Read our free research report to see why you should think twice about including SMTC in your portfolio.
Goldman Sachs (GS)
One-Year Revenue Growth: +17.8%
Founded in 1869 as a small commercial paper business in New York City, Goldman Sachs (NYSE:GS) is a global financial institution that provides investment banking, securities, asset management, and consumer banking services to corporations, governments, and individuals.
Why Does GS Fall Short?
- The company has faced growth challenges as its 3.5% annual revenue increases over the last five years fell short of other financials companies
- Earnings growth underperformed the sector average over the last five years as its EPS grew by just 3% annually
- Sizable asset base leads to capital growth challenges as its 4.9% annual tangible book value per share increases over the last two years fell short of other financials companies
At $1,036 per share, Goldman Sachs trades at 14.4x forward P/E. Check out our free in-depth research report to learn more about why GS doesn’t pass our bar.
One Growth Stock to Buy:
Riley Exploration Permian (REPX)
One-Year Revenue Growth: +23.2%
Operating in counties where legacy oil fields have been producing since the early 1900s, Riley Exploration Permian (NYSE:REPX) drills for and produces oil and natural gas from horizontal wells in the Permian Basin of West Texas and New Mexico.
Why Is REPX a Good Business?
- Market share has increased this cycle as its 30.8% annual revenue growth over the last eight years was exceptional
- Highly-profitable operating model results in strong unit economics and a best-in-class gross margin of 76.4%
- Impressive free cash flow profitability enables the company to fund new investments or reward investors with share buybacks/dividends
Riley Exploration Permian’s stock price of $42.76 implies a valuation ratio of 5.4x forward P/E. Is now a good time to buy? See for yourself 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 (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+214% between June 2020 and June 2025). Find your next big winner with StockStory today.