Built on a mission "to unleash the potential of every team," the software products from Atlassian Corporation (NASDAQ:TEAM) have lifted its stock to incredible heights. Over the past three years, shareholders have realized an amazing 390% return on their investment.

TEAM Chart

Three-year stock returns versus S&P500 through July 17, 2020. Data by YCharts.

You might be thinking that you've missed the ride on this growth stock, but you're about to get an introduction to this software powerhouse and three great reasons its stock is still a buy.

1. It has a sticky ecosystem

Atlassian sells a set of software products to help teams manage all facets of a project. A team could be using its Confluence product to collaborate on shared content, OpsGenie to track and manage issues, or Jira to keep track of who's doing what. Regardless of which software module set people are using, all of the products work seamlessly together. 

Image of a virtual team working together on a software project.

Image source: Getty Images.

This ecosystem of tools makes Atlassian's land-and-expand model highly effective. A small team might start out with a free version of Jira for coordinating project management tasks. As the group gets larger or the project takes on more complexity, they might upgrade to the paid version or add any one of the other modules, depending on the project's needs. Having a number of different offerings casts a wide net to bring in users.

Because Atlassian's products help coordinate the activities of teams, once one member tries the software, usage often spreads naturally throughout the organization. The integration of the company's toolset also makes for a high switching cost. This easy-to-onboard but tough-to-leave ecosystem of products is fueling Atlassian's growth in its massive addressable market.

2. It's growing into a huge market opportunity

Atlassian's business model also helps grow revenue with existing customers. This is evident when you compare revenue versus customer growth. Over the past two years, revenue has climbed considerably faster than its client base, indicating that customers are paying more every year for the company's services.

Metrics

Q3 2018

Q3 2019

Q3 2020

Compound Annual
Growth Rate

TTM Revenue

$809 million

$1.12 billion

$1.52 billion

37%

Customers 

119,158

144,038

171,051

20%

Note: Number of customers is at end of period. Atlassian's fiscal third quarter completes at the end of March each year. TTM = trailing 12 months. Data source: Atlassian quarterly earnings presentations.

What's even more exciting for investors is that the company has barely tapped its addressable market. Atlassian is expanding beyond its initial focus on software developers and reaching out to business users across the enterprise.

Three ever increasing sized squares representing 23 million software developers, 100 million non-technical team members, and 800 million knowledge workers.

Image source: Atlassian investor presentation.

Management estimates there are more than 23 million software developers worldwide who are prime candidates for Atlassian's team collaboration toolset. But those developers can't implement projects in a vacuum. A developer can easily invite project members from outside the information technology (IT) function to use the software and help collaborate. This opens up the software to more than four times the number of potential users. Additionally, non-IT teams can utilize this software, expanding the opportunity even more.

Although Atlassian doesn't release user data, it shared the results of a recent survey of Jira Service Desk users. It found that 42% of users were non-technical, indicating that its strategy to reach beyond software professionals is working.

If a solid history of growth and a huge market opportunity isn't enough to convince you this stock is a buy, a peek at its financials might help. 

3. Its rock-solid financials provide optionality

Although the company reported a $19.9 million operating loss on revenues of $411.6 million last quarter, its cash flows are impressive, and the balance sheet is on solid footing. It generated $140.3 million in free cash flow, which is a notable 34% of the top line. The balance sheet also includes $2.1 billion in cash and equivalents with zero debt. This strong financial position gives the company optionality during this challenging time.

On the most recent earnings call, co-founder and CEO Mike Cannon-Brookes shared the leadership's mindset on how it's navigating the pandemic:

We wanted to be very clear with investors and partners about how we were approaching the current environment, which is obviously unusual [...] We have a capability to actually gain share through these quarters with turbulence, however they come at us. And we remain very adaptable and thoughtful about them.

He went on to explain that the company is being opportunistic during this time as it continues to hire talented resources, invest in R&D, and consider smart acquisitions.

The bottom line for investors

This team-based software specialist has tremendous financial resources to invest in its ecosystem of products and will continue to grow into its huge market. As the coronavirus is forcing many employers to adopt remote work situations, it's creating a unique tailwind for Atlassian. Since its software products are perfectly suited to "unleash the power of teams" wherever and however they work, it's likely Atlassian will emerge from this pandemic stronger. 

Even at a premium price-to-sales ratio of 28, this innovative growth stock is worth adding to your portfolio today.