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.

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 climbing an uphill battle and some other opportunities you should consider instead.

Shoals (SHLS)

One-Year Revenue Growth: +19.1%

Started in Huntsville, Alabama, Shoals (NASDAQ: SHLS) designs and manufactures products that make solar energy systems work more efficiently.

Why Do We Think Twice About SHLS?

1. Sales tumbled by 1.4% annually over the last two years, showing market trends are working against its favor during this cycle
2. Earnings per share decreased by more than its revenue over the last two years, showing each sale was less profitable
3. Eroding returns on capital suggest its historical profit centers are aging

At $6.05 per share, Shoals trades at 14.4x forward P/E. Read our free research report to see why you should think twice about including SHLS in your portfolio.

Aflac (AFL)

One-Year Revenue Growth: +24.6%

Known for its iconic duck mascot that has quacked "Aflac!" in commercials since 2000, Aflac (NYSE: AFL) provides supplemental health and life insurance policies that pay cash benefits directly to policyholders for expenses not covered by their primary insurance.

Why Do We Steer Clear of AFL?

1. Insurance offerings face significant market challenges this cycle as net premiums earned contracted by 6.2% annually over the last five years
2. Forecasted revenue decline of 1.1% for the upcoming 12 months implies demand will fall off a cliff
3. Book value per share is projected to decrease by 2.5% over the next 12 months as capital generation weakens

Aflac’s stock price of $107.12 implies a valuation ratio of 1.8x forward P/B. Dive into our free research report to see why there are better opportunities than AFL.

Customers Bancorp (CUBI)

One-Year Revenue Growth: +19%

Originally founded with a "high-tech, high-touch" branch-light banking strategy, Customers Bancorp (NYSE: CUBI) is a bank holding company that provides commercial and consumer banking services through its Customers Bank subsidiary, with a focus on business lending and digital banking.

Why Does CUBI Fall Short?

1. 6.8% annual revenue growth over the last two years was slower than its banking peers
2. Net interest margin of 3.2% is well below other banks, signaling its loans aren’t very profitable
3. Earnings per share were flat over the last two years while its revenue grew, showing its incremental sales were less profitable

Customers Bancorp is trading at $66.12 per share, or 0.9x forward P/B. Check out our free in-depth research report to learn more about why CUBI doesn’t pass our bar.

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