Growth boosts valuation multiples, but it doesn’t always last forever. Companies that cannot maintain it are often penalized with large declines in market value, a lesson ingrained in investors who lost money in tech stocks during 2022.
The risks that can come from buying these assets is precisely why we started StockStory – to isolate the long-term winners from the losers so you can invest with confidence. Keeping that in mind, here is one growth stock expanding its competitive advantage and two that could be down big.
One-Year Revenue Growth: +18.3%
With roots dating back to 1982 and a strong presence in the Mid-Atlantic region, United Bankshares (NASDAQ:UBSI) is a bank holding company that provides commercial and retail banking services through its United Bank subsidiary across multiple states.
Why Are We Out on UBSI?
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Muted 3.4% annual revenue growth over the last five years shows its demand lagged behind its banking peers
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Muted 4.8% annual net interest income growth over the last five years shows its demand lagged behind its banking peers
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Earnings per share lagged its peers over the last five years as they only grew by 4.6% annually
United Bankshares is trading at $44.29 per share, or 1.1x forward P/B. Check out our free in-depth research report to learn more about why UBSI doesn’t pass our bar.
One-Year Revenue Growth: +20.8%
Holding roughly 521,000 net acres across West Virginia, Ohio, and Pennsylvania, Antero Resources (NYSE:AR) drills and produces natural gas, natural gas liquids, and oil from underground rock formations in the Appalachian Basin.
Why Are We Cautious About AR?
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Sales trends were unexciting over the last five years as its 5.4% annual growth was below the typical energy upstream and integrated energy company
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Costs have risen faster than its revenue over the last five years, causing its EBITDA margin to decline by 1.9 percentage points
Antero Resources’s stock price of $36.89 implies a valuation ratio of 8.6x forward P/E. To fully understand why you should be careful with AR, check out our full research report (it’s free).
One-Year Revenue Growth: +19.7%
Nicknamed “the Excel killer” by some finance professionals for its ability to eliminate spreadsheet chaos, Workiva (NYSE:WK) provides a cloud-based platform that enables organizations to streamline financial reporting, ESG, and compliance processes with connected data and automation.
Why Does WK Stand Out?
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ARR trends over the last year show it’s maintaining a steady flow of long-term contracts that contribute positively to its revenue predictability
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Software is difficult to replicate at scale and results in a stellar gross margin of 78.5%
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Free cash flow margin is expected to increase by 3.2 percentage points next year, suggesting the company will have more capital to invest or return to shareholders
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