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.

Deciphering which businesses can sustain their high growth rates is a challenge for even the most seasoned professionals, which is why we started StockStory. That said, here are three growth stocks with significant upside potential.

Microsoft (MSFT)

1-Year Revenue Growth: +15%

Short for microcomputer software, Microsoft (NASDAQ:MSFT) is the largest software vendor in the world with its Windows operating system, Office suite, and cloud computing services.

Why Is MSFT a Top Pick?

1. Microsoft is one of the great brands not just in tech but all of business. It produces mission-critical software and bundles it together, resulting in cream-of-the-crop gross margins.
2. The company's elite unit economics lead to robust profit margins that improve over time. This speaks to the scale advantages and operating efficiency across its diverse portfolio, which spans everything from Office and Azure to Minecraft.
3. Microsoft has a virtuous cycle of returns. Its dominant market position enables it to generate strong free cash flow, and it reinvests these funds into promising ventures that further strengthen its competitive moat.

Microsoft’s stock price of $396.89 implies a valuation ratio of 29.1x forward price-to-earnings. Is now the time to initiate a position? See for yourself in our full research report, it’s free.

Nova (NVMI)

1-Year Revenue Growth: +29.8%

Headquartered in Israel, Nova (NASDAQ:NVMI) is a provider of quality control systems used in semiconductor manufacturing.

Why Will NVMI Beat the Market?

1. Market share has increased this cycle as its 24.5% annual revenue growth over the last five years was exceptional
2. Free cash flow margin grew by 12.3 percentage points over the last five years, giving the company more chips to play with
3. Market-beating returns on capital illustrate that management has a knack for investing in profitable ventures

At $220 per share, Nova trades at 28.3x forward price-to-earnings. Is now a good time to buy? Find out in our full research report, it’s free.

Vertiv (VRT)

1-Year Revenue Growth: +16.7%

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

Why Will VRT Outperform?

1. Core business is healthy and doesn’t need acquisitions to boost sales as its organic revenue growth averaged 19.7% over the past two years
2. Incremental sales significantly boosted profitability as its annual earnings per share growth of 131% over the last two years outstripped its revenue performance
3. Free cash flow margin increased by 10.4 percentage points over the last five years, giving the company more capital to invest or return to shareholders

Vertiv is trading at $82.50 per share, or 23x forward price-to-earnings. Is now the right time to buy? See for yourself in our comprehensive research report, it’s free.

Stocks We Like Even More

With rates dropping, inflation stabilizing, and the elections in the rearview mirror, all signs point to the start of a new bull run - and we’re laser-focused on finding the best stocks for this upcoming cycle.

Put yourself in the driver’s seat by checking out our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.

Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like United Rentals (+322% five-year return). Find your next big winner with StockStory today for free.