2 Growth Stocks with All-Star Potential and 1 We Avoid

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.

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 with significant upside potential and one climbing an uphill battle.

One-Year Revenue Growth: +48.6%

Founded in 1969, FuelCell Energy (NASDAQ: FCEL) is a leading manufacturer and developer of carbonate fuel cell technology for stationary power generation.

Why Does FCEL Fall Short?

1. Backlog growth averaged a weak 6.2% over the past two years, suggesting it may need to tweak its product roadmap or go-to-market strategy

2. Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 31 percentage points

3. Limited cash reserves may force the company to seek unfavorable financing terms that could dilute shareholders

FuelCell Energy is trading at $4.75 per share, or 0.5x forward price-to-sales. To fully understand why you should be careful with FCEL, check out our full research report (it’s free).

One-Year Revenue Growth: +26.3%

Formerly part of Emerson Electric, Vertiv (NYSE:VRT) manufactures and services infrastructure technology products for data centers and communication networks.

Why Are We Backing VRT?

1. Average organic revenue growth of 19.6% over the past two years demonstrates its ability to expand independently without relying on acquisitions

2. Free cash flow margin grew by 5.6 percentage points over the last five years, giving the company more chips to play with

3. Improving returns on capital reflect management’s ability to monetize investments

Vertiv’s stock price of $137.69 implies a valuation ratio of 34.6x forward P/E. Is now the right time to buy? See for yourself in our comprehensive research report, it’s free.

One-Year Revenue Growth: +46.5%

With over 120 offices across 33 states and a team of more than 6,700 professionals, CBIZ (NYSE:CBZ) provides accounting, tax, benefits, insurance brokerage, and advisory services to help small and mid-sized businesses manage their finances and operations.

Why Could CBZ Be a Winner?

1. Market share has increased this cycle as its 26.6% annual revenue growth over the last two years was exceptional

2. Demand for the next 12 months is expected to accelerate above its two-year trend as Wall Street forecasts robust revenue growth of 45.6%

3. Earnings growth has massively outpaced its peers over the last two years as its EPS has compounded at 29.6% annually