Growth is a hallmark of all great companies, but the laws of gravity eventually take hold. Those who rode the COVID boom and ensuing tech selloff in 2022 will surely remember that the market’s punishment can be swift and severe when trajectories fall.
Deciphering which businesses can sustain their high growth rates is a challenge for even the most seasoned professionals, which is why we started StockStory. Keeping that in mind, here are two growth stocks expanding their competitive advantages and one facing an uphill battle.
One Growth Stock to Sell:
Encore Capital Group (ECPG)
One-Year Revenue Growth: +29.5%
Operating in the often misunderstood world of debt collection since 1999, Encore Capital Group (NASDAQ: ECPG) purchases portfolios of defaulted consumer debt at deep discounts and works with individuals to recover these obligations while helping them toward financial recovery.
Why Does ECPG Worry Us?
- Sales trends were unexciting over the last five years as its 3.1% annual growth was below the typical financials company
- ROE of 7% reflects management’s challenges in identifying attractive investment opportunities
- High net-debt-to-EBITDA ratio of 5× could force the company to raise capital on unfavorable terms if market conditions deteriorate
Encore Capital Group is trading at $103.38 per share, or 1.8x forward P/B. If you’re considering ECPG for your portfolio, see our FREE research report to learn more.
Two Growth Stocks to Watch:
DigitalOcean (DOCN)
One-Year Revenue Growth: +21.4%
Built for simplicity in a world of complex cloud solutions, DigitalOcean (NYSE: DOCN) provides a simplified cloud computing platform that enables developers and small businesses to quickly deploy and scale applications.
Why Do We Like DOCN?
- Average billings growth of 25.2% over the last year enhances its liquidity and shows there is steady demand for its products
- Exciting sales outlook for the upcoming 12 months calls for 40.5% growth, an acceleration from its two-year trend
- Well-designed software integrates seamlessly with other workflows, enabling swift payback periods on marketing expenses and customer growth at scale
DigitalOcean’s stock price of $111 implies a valuation ratio of 10.3x forward price-to-sales. Is now a good time to buy? See for yourself in our in-depth research report, it’s free.
Caterpillar (CAT)
One-Year Revenue Growth: +18.4%
With its iconic yellow machinery working on construction sites, Caterpillar (NYSE: CAT) manufactures construction equipment like bulldozers, excavators, and parts and maintenance services.
Why Does CAT Catch Our Eye?
- Offerings and unique value proposition resonate with customers, as seen in its above-market 10.2% annual sales growth over the last five years
- Share buybacks catapulted its annual earnings per share growth to 21.7%, which outperformed its revenue gains over the last five years
- Free cash flow margin increased by 6.6 percentage points over the last five years, giving the company more capital to invest or return to shareholders
At $810.85 per share, Caterpillar trades at 28.8x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
Stocks We Like Even More
ALSO WORTH WATCHING: Top 5 Momentum Stocks. The best time to own a great stock is when the market is finally noticing it. These aren’t just high-quality businesses. Something is happening with them right now. Elite fundamentals meet near-term momentum — both boxes checked at the same time.
Find out which stocks our AI platform is flagging this week. See this week’s Strong Momentum stocks — FREE. Get Our Strong Momentum 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-small-cap company Exlservice (+271% between June 2020 and June 2025). Find your next big winner with StockStory today.
