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. On that note, here are three growth stocks expanding their competitive advantages.
Confluent (CFLT)
One-Year Revenue Growth: +24%
Started in 2014 by the team of engineers at LinkedIn who originally built it as an internal tool, Confluent (NASDAQ:CFLT) provides infrastructure software for organizations that makes it easy and fast to collect and move large amounts of data between different systems.
Why Does CFLT Stand Out?
- Winning new contracts that can potentially increase in value as its billings growth has averaged 26.4% over the last year
- Customers use its software daily and increase their spending every year, as seen in its 119% net revenue retention rate
- Forecasted revenue growth of 20.8% for the next 12 months indicates its momentum over the last three years is sustainable
At $26.25 per share, Confluent trades at 7.2x forward price-to-sales. Is now a good time to buy? Find out in our full research report, it’s free.
Toast (TOST)
One-Year Revenue Growth: +28.3%
Founded by three MIT engineers at a local Cambridge bar, Toast (NYSE:TOST) provides integrated point-of-sale (POS) hardware, software, and payments solutions for restaurants.
Why Are We Positive On TOST?
- Customers view its software as mission-critical to their operations as its ARR has averaged 30.6% growth over the last year
- Revenue outlook for the upcoming 12 months is outstanding and shows it’s on track to gain market share
- Fast payback periods on sales and marketing expenses allow the company to invest heavily and onboard many customers concurrently
Toast is trading at $34.30 per share, or 3.3x forward price-to-sales. Is now the right time to buy? See for yourself in our comprehensive research report, it’s free.
Robinhood (HOOD)
One-Year Revenue Growth: +58.2%
With a mission to democratize finance, Robinhood (NASDAQ:HOOD) is an online consumer finance platform known for its commission-free stock and crypto trading.
Why Are We Bullish on HOOD?
- Monetization efforts are paying off as its average revenue per user has grown by 43.9% annually over the last two years
- Incremental sales significantly boosted profitability as its annual earnings per share growth of 30.5% over the last three years outstripped its revenue performance
- Free cash flow margin increased significantly over the last four years, giving the company more capital to invest or return to shareholders
Robinhood’s stock price of $38.65 implies a valuation ratio of 19.3x forward EV-to-EBITDA. Is now a good time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
The elections are now behind us. With rates dropping and inflation cooling, many analysts expect a breakout market - and we’re zeroing in on the stocks that could benefit immensely.
Take advantage of the rebound by checking out our Top 9 Market-Beating Stocks. 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 Axon (+711% five-year return). Find your next big winner with StockStory today for free.