Cloud-based software applications were a high-growth segment of IT before the pandemic, but COVID-19 accelerated a move to the cloud last year. Against this backdrop, project management toolset provider Asana (NYSE:ASAN) made its public debut via IPO in the autumn of 2020. 

This is no one-off pandemic-fueled winner, though. Asana is anticipating another year of rapid growth, building on its strong showing during the worst of the COVID-19 crisis and proving that the migration to the cloud will continue even as the effects of the pandemic ease. It's still early days for this business, though, so it's worth looking at the long-term potential of this possible millionaire-maker stock.

Three people using laptops at an outdoor cafe.

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Project management to the cloud

Project management software isn't new. Perhaps you've used tools like Trello or Jira, both of which are products from Atlassian (NASDAQ:TEAM), the largest independent provider of workflow management software. While tech tools like this are a niche in the end-user software realm, they've done pretty well for investors. Since Atlassian made its debut back in December 2015, shares have provided a tidy 840% return. Even after that run, Atlassian is still far from a software industry giant, with an enterprise value (market cap plus debt minus cash and equivalents) of about $64 billion. 

As good a business as it may be, Atlassian has hardly mopped the floor in the project management space. There are a myriad of non-public competitors out there, many of which are growing at a brisk pace. Adobe (NASDAQ:ADBE) recently acquired one of them, called Workfront. Monday.com (NASDAQ:MNDY) is a no-code platform that helps customers build their own workflow management apps, and attracted notable investments from salesforce.com (NYSE:CRM) and Zoom Video Communications (NASDAQ:ZM) in its IPO just last month. 

But Asana's offering was named best of them all, according to software reviewer G2. Reviewers sung the praise of Asana's easy-to-use interface, simplification of projects to keep business teams focused on actually doing work, and seamless integration with other apps. Tech researcher IDC also recently named Asana a leader among project management and workflow vendors.

Early shareholders likely knew this already, though. Asana stock is up 127% as of this writing from its debut on public markets last autumn. 

A strong base to build from

Asana's winning formula is on display in its financial results. Fiscal 2022 first-quarter (the three months ended April 30, 2021) revenue growth accelerated to 61% year-over-year, up from the 59% rate posted last year. For the full fiscal year 2022, revenue is expected to be no less than $336 million, representing a 48% increase. So much for Asana (and other cloud stocks for that matter) being a pandemic bubble.

Underlying those figures are over 100,000 paying customers (Asana has a free-to-use tier with limited features), and overall dollar-based net retention of 115% in its last quarter -- implying the average existing customer spent 15% more with Asana than 12 months ago. This is thanks to more users being added to accounts, as well as account upgrades (unlocking additional features), and speaks to the scalability of Asana as an organization's workflow management needs grow. Even more impressive, though, dollar-based net retention for customers that spend at least $50,000 a year with Asana was over 140% in Q1 -- implying Asana's biggest customers spent 40% more than last year. 

Clearly Asana is doing something right and is winning over lots of new business, but this is still a small company with lots of potential. In fact, the whole cloud-based project management space is still wide open. As big as Atlassian has gotten, it too is a fast-growing firm -- it boasted nearly 213,000 paying customers and revenue of $569 million, a 38% annual increase, during its last quarter. Monday.com is no slouch either. It reported revenue of $59 million in Q1 2021, an 85% increase from a year prior, and expects to have an enviable $800 million in cash and equivalents on hand after its IPO.

Asana itself has a solid foundation, with $386 million in cash and equivalents on the books as of the end of April, but it also has convertible debt of $361 million -- not exactly the cleanest balance sheet. However, Asana isn't too far off from breaking even on free cash flow (negative $24.4 million in Q1), so it's not at risk of running out of money as it spends heavily to maximize expansion. 

Is Asana a buy?

Could Asana stock help make you a millionaire? Maybe, although it's too soon to say who will be the ultimate winner here. Atlassian is the clear-cut project and workflow management leader at this point, and Monday.com could be a serious challenger too. Though Asana gets top marks for its take on this software niche, know that there is competition with deep pockets out there. 

I haven't started investing directly in this space yet (I already own shares of Workfront owner Adobe, as well as stakes in Monday.com investors Salesforce and Zoom), but I plan to. When I do, I'll likely buy a small position in all three (less than 1% to each stock), see who wins out over the long-term, and eventually part ways with the laggards -- a strategy I often utilize, like with my initial bet on the edge computing industry in early 2020. It's still early days for the cloud computing industry and Asana has a lot of potential, so it's worth keeping tabs on at the very least.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.