A Few Years From Now, You'll Wish You'd Bought This High-Growth Stock

Every investor wants to buy stocks that do well over time, helping to build wealth for the future. Enough of these successful investments over decades can help make big financial dreams a reality. As fun as it is to look back with fondness at previous stock purchases, there's also sometimes regret at the ones that got away. No investor gets everything right, and there are inevitably decisions we look back on that make us think, "I should have bought that stock."

However, until crystal balls are invented, the best investors can do is look at a business's fundamentals and prospects to make the most informed decision possible. Following that logic, I would put CrowdStrike (CRWD 2.20%) at the top of the list.

Cybersecurity is a growing industry that is already indispensable

Missing out on a stock that crushes the market over time can happen for several reasons. For example, investors can miss the fact that the company was at the forefront of a growing, important secular trend. When it comes to CrowdStrike, this is certainly the case. According to the company, the total addressable market for artificial intelligence (AI)-native security platforms is $100 billion. This is expected to increase to $225 billion by 2028.

Total addressable market numbers should always be taken with a grain of salt, especially when they come from the company itself. In this case, the actual numbers matter less than the direction of the trend. Considering how important it is to protect against cybersecurity threats, it's reasonable to assume this market will continue to grow.

Growing and improving profitability

One of the most impressive aspects of CrowdStrike's business is its long track record of consistent growth in essentially all aspects of its business. Since it came public in June 2019, CrowdStrike averaged year-over-year quarterly revenue growth of 67%. More recently this growth slowed, but only to a still-impressive 33% in the most recently reported quarter.

The slowing growth isn't a concern because of how cash generation and profitability progressed over the same period. Consider the improvement over the last year in operating income and net income.

Data source: CrowdStrike

There's a similar story taking place on the cash-flow statement. In Q4 2023, CrowdStrike generated $209 in free cash flow. This improved by 35% to $283 million in Q4 2024, representing a record 33% of revenue. These results are even more impressive considering this profitability and cash generation improvement happened even as revenue growth slowed.

Perhaps most encouraging for investors is that CrowdStrike doesn't see these results slowing down. At the midpoint of its guidance, the company is expecting full-year 2025 revenue to grow 29% with non-GAAP (adjusted) operating income and non-GAAP net income increasing by 35% and 29%, respectively.

The bottom line for investors

As one might expect, these results led to an expensive valuation for CrowdStrike, which currently trades for 23 times sales and 76 times free cash flow. There's no other way to put it: Shares are expensive today. That said, the secular tailwinds for this company and the cybersecurity industry are significant.

While I wouldn't take a large position in CrowdStrike at this valuation, I do think a starter position is reasonable. CrowdStrike has all the makings of a stock that may never be cheap, so investors will need to be ready to pay some amount of premium for this premium company.