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 three growth stocks whose best days may be over and some alternatives you should consider instead.
Jackson Financial (JXN)
One-Year Revenue Growth: +102%
Spun off from British insurer Prudential plc in 2021 after more than 60 years as its U.S. subsidiary, Jackson Financial (NYSE: JXN) offers annuity products and retirement solutions that help Americans grow and protect their retirement savings and income.
Why Are We Wary of JXN?
- Net premiums earned expanded by 1.9% annually over the last two years, falling below our expectations for the insurance sector
- Costs have risen faster than its revenue over the last two years, causing its pre-tax profit margin to decline by 32.8 percentage points
- Earnings per share have contracted by 2.3% annually over the last four years, a headwind for returns as stock prices often echo long-term EPS performance
Jackson Financial is trading at $111.84 per share, or 0.7x forward P/B. To fully understand why you should be careful with JXN, check out our full research report (it’s free).
Nelnet (NNI)
One-Year Revenue Growth: +23.5%
Starting as a student loan servicer in the 1970s and evolving through the changing landscape of education finance, Nelnet (NYSE: NNI) provides student loan servicing, education technology, payment processing, and banking services while managing a portfolio of education loans.
Why Do We Think Twice About NNI?
- Incremental sales over the last five years were less profitable as its 4.3% annual earnings per share growth lagged its revenue gains
- Low return on equity reflects management’s struggle to allocate funds effectively
At $131.80 per share, Nelnet trades at 14.3x forward P/E. Check out our free in-depth research report to learn more about why NNI doesn’t pass our bar.
Columbia Financial (CLBK)
One-Year Revenue Growth: +50.4%
Founded during the Roaring Twenties in 1926 and headquartered in Fair Lawn, New Jersey, Columbia Financial (NASDAQ: CLBK) operates federally chartered savings banks in New Jersey that offer traditional banking services including loans, deposits, and insurance products.
Why Do We Think CLBK Will Underperform?
- Loans are facing end-market challenges during this cycle, as seen in its flat net interest income over the last five years
- Net interest margin of 2.1% is well below other banks, signaling its loans aren’t very profitable
- Earnings per share fell by 1.9% annually over the last five years while its revenue grew, showing its incremental sales were much less profitable
Columbia Financial’s stock price of $17.87 implies a valuation ratio of 1.4x forward P/B. If you’re considering CLBK for your portfolio, see our FREE research report to learn more.
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