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.
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. On that note, here are two growth stocks expanding their competitive advantages and one facing an uphill battle.
One Growth Stock to Sell:
AeroVironment (AVAV)
One-Year Revenue Growth: +117%
Focused on the future of autonomous military combat, AeroVironment (NASDAQ: AVAV) specializes in advanced unmanned aircraft systems and electric vehicle charging solutions.
Why Does AVAV Give Us Pause?
- Expenses have increased as a percentage of revenue over the last five years as its operating margin fell by 15.3 percentage points
- Earnings per share fell by 8.4% annually over the last two years while its revenue grew, showing its incremental sales were much less profitable
- Free cash flow margin shrank by 6.3 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
At $169.25 per share, AeroVironment trades at 43.1x forward P/E. If you’re considering AVAV for your portfolio, see our FREE research report to learn more.
Two Growth Stocks to Watch:
Incyte (INCY)
One-Year Revenue Growth: +21.5%
Founded in 1991 and evolving from a genomics research firm to a commercial-stage drug developer, Incyte (NASDAQ: INCY) is a biopharmaceutical company that discovers, develops, and commercializes proprietary therapeutics for cancer and inflammatory diseases.
Why Are We Positive on INCY?
- Annual revenue growth of 18.7% over the past two years was outstanding, reflecting market share gains this cycle
- Share repurchases have amplified shareholder returns as its annual earnings per share growth of 19.4% exceeded its revenue gains over the last five years
- Free cash flow margin expanded by 6.9 percentage points over the last five years, providing additional flexibility for investments and share buybacks/dividends
Incyte’s stock price of $98.22 implies a valuation ratio of 3.6x forward price-to-sales. Is now the time to initiate a position? Find out in our full research report, it’s free.
Arthur J. Gallagher (AJG)
One-Year Revenue Growth: +25%
Founded in 1927 and operating in approximately 130 countries through direct operations and correspondent networks, Arthur J. Gallagher (NYSE: AJG) provides insurance brokerage, reinsurance, consulting, and third-party claims settlement services to businesses and individuals worldwide.
Why Will AJG Beat the Market?
- Market share has increased this cycle as its 19.1% annual revenue growth over the last two years was exceptional
- Earnings growth has trumped its peers over the last five years as its EPS has compounded at 18.5% annually
- Robust free cash flow margin of 18.9% gives it many options for capital deployment
Arthur J. Gallagher is trading at $214.75 per share, or 15.6x forward P/E. Is now the right time to buy? See for yourself 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 (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today.
