Growth stocks are your best choice for ensuring your investment portfolio not only beats inflation but also increases steadily in value to help you better prepare for your retirement. Many investors have been touting the strengths and benefits of the “Magnificent Seven” group of stocks and are familiar with their characteristics.
The problem with large growth stocks is that size itself is a limiting factor — it can be tough for a huge organization to grow quickly. For that reason, it pays to look at medium-sized growth companies. Their smaller size and customer base provide significant leeway for them to grow rapidly, underpinned by growing demand for their products or services. It helps if they have tailwinds that can propel their revenue and earnings higher, helping the share price to do the same.
Armed with these characteristics, such stocks could multiply your wealth more quickly than the larger growth stocks. Here are three stocks with the potential to increase your investment portfolio by fivefold or more by 2030.
1. Fortinet
Fortinet (NASDAQ: FTNT) is a cybersecurity firm that has a portfolio of more than 50 enterprise-grade products. The company utilizes machine learning and artificial intelligence (AI) technologies to identify threats and keep organizations safe. With more businesses digitalizing and using cloud software, Fortinet should also enjoy increased demand for its products.
For 2023, the company’s revenue rose 20.2% year over year to $5.3 billion, while operating income jumped 28% to $1.2 billion. Net income came in at $1.1 billion for the year, up nearly 34%. The business also generated a positive free cash flow of $1.7 billion for 2023, which was nearly 20% higher than what was churned out in the previous year.
The momentum has carried over into the first quarter of 2024, as Fortinet reported a 7% year-over-year improvement in revenue to $1.35 billion. Of note, service revenue leaped 24% to $944 million for the quarter, and the cybersecurity specialist also generated a positive free cash flow of $609 million.
In early May, Fortinet announced the sector’s first-ever generative AI Internet of Things (IoT) security assistant to enhance the software’s operations and allow any individual to use natural language to utilize the software, thus eliminating the need to specifically train staff to handle the software.
Management has identified a total addressable market of $144 billion this year that could potentially grow to $222 billion by 2028, thus giving the business ample opportunity to grow its revenue and profits over time.
2. Braze
Braze (NASDAQ: BRZE) provides a customer engagement platform that allows marketers to collect and analyze data from any source. By doing so, these marketers can better engage their customers and tailor messages for them across different channels.
The company posted encouraging financial numbers for its fiscal 2024, which ended Jan. 31, 2024. Revenue climbed 32.7% year over year to $471.8 million, with gross profit surging by 35.3% year over year to $324.3 million. Operating cash flow turned positive for fiscal 2024, and Braze is close to generating positive free cash flow. The company is guiding for revenue of $572.5 million for fiscal 2025, representing a growth rate of 21.3%.
Braze is also seeing significant traction when it comes to garnering customers. Total customer count increased by 15% year over year to 2,044 for the fourth quarter of the fiscal year while customers with more than $500,000 of annual recurring revenue shot up 29% year over year to 202. Total remaining performance obligations surged by 40% year over year to $639.2 million, also for the fourth quarter.
The company is not limiting itself to specific sectors but is cutting across different industries such as media and entertainment, health and fitness, and travel and hospitality in search of more customers. Braze is also expanding internationally in countries such as Singapore, Indonesia, and Australia, and management is finding opportunities in different facets of many organizations.
With its unique value proposition and growing presence in 75 countries, Braze looks set to continue its breakneck growth.
3. Samsara
Samsara (NYSE: IOT) operates a platform that helps complex organizations improve their safety and efficiency. The company makes use of artificial intelligence (AI)-powered programs to protect employees, improve asset utilization, and lower maintenance costs.
Samsara reported a nearly 44% year-over-year jump in revenue to $937.4 million for its fiscal 2024, which ended Feb 3, 2024. Gross profit climbed almost 47% year over year to $690.4 million. The business saw a sharp improvement in operating cash flow, going from negative $103 million in the prior year to negative $11.8 million, and could be on its way to positive operating cash flow soon.
Samsara also witnessed good customer momentum as customers paid more for the company’s services. For the fourth quarter of fiscal 2024, Customers with $100,000 or more in annual recurring revenue (ARR) shot up 49% year over year to 1,848, while those paying $1 million or more in ARR leaped 61% year over year to 82. Customers with more than $100,000 in ARR now make up slightly more than half of Samsara’s total customer base, up from 45% two years ago.
The company’s strategy of “land and expand” showed that 53% of its net new annual contract value (ACV) was made up of expansion customers, while the remainder were new customers. What’s more, 16% of the latest quarter’s net new ACV came from international customers, a testament to Samsara’s ability to expand its network to more countries. Samsara expects fiscal 2025’s revenue will grow 27% to 28%, putting total sales at around $1.19 billion at the midpoint.
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Royston Yang has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Fortinet. The Motley Fool recommends Braze and Samsara. The Motley Fool has a disclosure policy.
3 Stocks That Could Turn $1,000 Into $5,000 by 2030 was originally published by The Motley Fool
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