Cloud stocks have been some of the biggest winners on the market in recent years, and few have done as well as Alteryx (NYSE:AYX), a provider of a self-service data analytics platform that allows businesses to break down and analyze data quickly and seamlessly.

Shares of the SaaS (software-as-a-service) stock have soared since its 2017 IPO, up more than 600% since then, as you can see from the chart below.

^SPX Chart

^SPX data by YCharts

Given the stock's breakout growth, investors may be wondering if it's too late to get in on this high-flying millionaire-maker. Though Alteryx has clearly rewarded early investors, there are a number of reasons to believe that it can still be a multi-bagger from here on out. Let's take a closer look.

A businessman looking at several charts on laptops

Image source: Getty Images.

Impressive growth

It's hard to deliver mammoth returns without strong top-line growth, and Alteryx does not disappoint here. The company's revenue jumped 65% to $417.9 million as it continues to grow its customer base and executes its "land and expand" business model, finding new customers and growing relationships with them over time. Total customers increased 30% last year to 6,087.

Not only did Alteryx's 2019 revenue soar, but top-line growth actually accelerated in each quarter, going from 51% in the first quarter to 75% in the fourth quarter. Management explained on the earnings call that fourth-quarter growth was driven by a record increase in large contracts and an uptick in contract duration. The overall acceleration of its revenue growth and those tailwinds in the fourth quarter bode well for growth in 2020 and beyond. High-growth companies generally see growth decelerate as they mature, not the opposite, so that acceleration is a sign Alteryx is executing particularly well and its product portfolio is in high demand.

Strong business model

Like other cloud software companies, Alteryx operates through a subscription model, which helps create sticky relationships with customers as they are billed at regular intervals, and it drives operating leverage as fixed costs are relatively stable. Revenue from incremental subscribers essentially goes to growth drivers like research and development and sales and marketing, or straight to the bottom line.

Last year, its gross margin was 91%, meaning that only a small portion of its revenue is used to cover direct costs like data centers and employees in customer support and professional services like consulting. That high gross margin should help the company grow profits over time.  

Additionally, Alteryx's products are sticky with its customer base, with the help of switching costs and network effects through Alteryx Community. Once customers have integrated its tools, they are highly likely to continue using them. According to the company's 10-K report, "Over time, many of our customers find that the use of our platform is strategic and collaborative in nature and our platform becomes a fundamental element of their operational, analytical and business processes."  The key word there is "fundamental." Even in tough times like today's, Alteryx's customers, including titans of industry like ChevronNetflix, and Toyota, aren't going to ditch the software to cut costs. It's become an essential tool to them for measuring and improving their business. 

Alteryx's net dollar-based expansion rate has been at least 125% in each of the last 12 quarters, meaning that existing customers on average have increased their spending on the platform by at least 25% each year.

Disruptive potential

Alteryx competes against a broad range of tech companies both big and small, but the data analytics specialist is benefiting from tailwinds in the industry that are driving a shift to the kind of self-service analytics that Alteryx provides. A number of its competitors are "manual, spreadsheet-driven processes and custom-built approaches in which potential customers have made significant investments," creating ample opportunities for industry disruption.  

Alteryx CEO Dean Stoecker estimates there is a $24 billion addressable market in data analytics, giving the company a long runway for growth as it generated $417.9 million in revenue last year.

A reasonable price

Alteryx shares aren't cheap, but compared to other high-flying cloud stocks, they look reasonably priced. The stock is down nearly a third from its all-time high due to the coronavirus-fueled sell-off and is cheaper than high-growth SaaS peers like Okta and Shopify, both of which have slower revenue growth than Alteryx. On a price-to-sales ratio, the most common way of measuring SaaS stock valuations as many are operating at a loss, Shopify trades at 46 times sales, Okta is valued at 31 times sales, and Alteryx is worth 19 times sales.

Additionally, Alteryx is profitable and has been cash flow positive for the last three years. Last year, the company finished with $38 million in operating income on a generally accepted accounting principles (GAAP) basis. Adjusted earnings per share was $0.94, giving the company a P/E ratio of 120, which is high but not astronomical given its growth potential.

Alteryx is valued at about $7 billion, making the company small enough that the stock could easily double or triple from here if it continues to put up strong growth.

Though Alteryx may have already made millionaires out of early investors, the recent pullback offers a good opportunity for new investors to catch a ride on this growth machine.