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.
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. That said, here are two growth stocks with significant upside potential and one whose momentum may slow.
One Growth Stock to Sell:
Lemonade (LMND)
One-Year Revenue Growth: +51.2%
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 Does LMND Fall Short?
- Performance over the past two years shows its incremental sales were less profitable, as its 17% annual earnings per share growth trailed its revenue gains
- Policy losses and capital returns have eroded its book value per share this cycle as its book value per share declined by 18.4% annually over the last five years
- Negative return on equity shows management lost money while trying to expand the business
At $57.15 per share, Lemonade trades at 9.2x forward P/B. Check out our free in-depth research report to learn more about why LMND doesn’t pass our bar.
Two Growth Stocks to Watch:
ESCO (ESE)
One-Year Revenue Growth: +30.9%
A developer of the communication systems used in the Batmobile of “The Dark Knight,” ESCO (NYSE: ESE) is a provider of engineered components for the aerospace, defense, and utility sectors.
Why Is ESE a Good Business?
- Impressive 12.3% annual revenue growth over the last two years indicates it’s winning market share this cycle
- Incremental sales significantly boosted profitability as its annual earnings per share growth of 38.4% over the last two years outstripped its revenue performance
- Free cash flow margin jumped by 10.9 percentage points over the last five years, giving the company more resources to pursue growth initiatives, repurchase shares, or pay dividends
ESCO is trading at $293.37 per share, or 35x forward P/E. Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.
Kratos (KTOS)
One-Year Revenue Growth: +21.8%
Established with a commitment to supporting national security, Kratos (NASDAQ: KTOS) is a provider of advanced engineering, technology, and security solutions tailored for critical national security applications.
Why Is KTOS Interesting?
- Existing business lines can expand without risky acquisitions as its organic revenue growth averaged 14.6% over the past two years
- Market share is on track to rise over the next 12 months as its 30.4% projected revenue growth implies demand will accelerate from its two-year trend
- Earnings growth has trumped its peers over the last two years as its EPS has compounded at 15.8% annually
Kratos’s stock price of $54.85 implies a valuation ratio of 70.8x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
ONE MORE THING: Top 6 Stocks for This Week. This market is separating quality stocks from expensive ones fast. AI taking down whole sectors with no warning. In a rotation this fast, you need more than a list of good companies.
Our AI system flagged Palantir before it ran 1,662%. AppLovin before it ran 753%. Nvidia before it ran 1,178%. Each week it produces 6 new names that pass the same tests. Get Our Top 6 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-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today.
