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 is 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 whose momentum may slow.
Two Growth Stocks to Sell:
Lemonade (LMND)
One-Year Revenue Growth: +23.1%
Built on the principle of giving back unused premiums to charitable causes selected by policyholders, Lemonade (NYSE: LMND) is a technology-driven insurance company that offers homeowners, renters, pet, car, and life insurance through an AI-powered digital platform.
Why Are We Hesitant About LMND?
- Earnings per share lagged its peers over the last four years as they only grew by 6.3% annually
- Policy losses and capital returns have eroded its book value per share this cycle as its book value per share declined by 184% annually over the last five years
- Negative return on equity shows that some of its growth strategies have backfired
Lemonade is trading at $40.75 per share, or 6.6x forward P/B. To fully understand why you should be careful with LMND, check out our full research report (it’s free).
Trustmark (TRMK)
One-Year Revenue Growth: +42.2%
Tracing its roots back to 1889 in Mississippi, Trustmark (NASDAQ: TRMK) is a financial services organization providing banking, wealth management, insurance, and mortgage services across five southeastern states.
Why Are We Wary of TRMK?
- Sales trends were unexciting over the last two years as its 2.3% annual growth was below the typical bank company
- Estimated net interest income growth of 4.8% for the next 12 months implies demand will slow from its five-year trend
- High debt servicing costs relative to its earnings leave little margin for error in meeting its financial obligations
At $38.59 per share, Trustmark trades at 1.1x forward P/B. If you’re considering TRMK for your portfolio, see our FREE research report to learn more.
One Growth Stock to Watch:
Qualcomm (QCOM)
One-Year Revenue Growth: +15.8%
Having been at the forefront of developing the standards for cellular connectivity for over four decades, Qualcomm (NASDAQ: QCOM) is a leading innovator and a fabless manufacturer of wireless technology chips used in smartphones, autos and internet of things appliances.
Why Do We Like QCOM?
- Solid 11.2% annual revenue growth over the last five years indicates its offering’s solve complex business issues
- Strong free cash flow margin of 30.5% enables it to reinvest or return capital consistently
- Market-beating returns on capital illustrate that management has a knack for investing in profitable ventures
Qualcomm’s stock price of $158.97 implies a valuation ratio of 13.5x forward P/E. Is now the time to initiate a position? See for yourself in our full research report, it’s free.
Stocks We Like Even More
Trump’s April 2024 tariff bombshell triggered a massive market selloff, but stocks have since staged an impressive recovery, leaving those who panic sold on the sidelines.
Take advantage of the rebound by checking out our Top 5 Growth Stocks for this month. 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-small-cap company Exlservice (+354% 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
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