As more of the economy goes digital, plenty of companies are making the switch and end up generating significant amounts of data. Managing all that new data becomes a hassle, but it's only a small part of the broader challenge. These organizations have begun to realize that their data has real underlying value. For instance, they are finding that it can be extremely useful to monitor worker performance in ways the client companies never considered, and link tasks of thousands of employees in new ways that make operations even more efficient. 

There is a whole new industry sprouting up to address this need. Today, we are focusing on two companies that offer tools to reveal the hidden performance the data is providing, and they are helping organizations leverage data into more revenue. Their ability to provide this service is helping them grow their own revenue. That suggests their stocks could be great long-term bets for your portfolio.

Let's find out a bit more about these two data-oriented growth stocks.

A standing person drawing on a translucent digital screen, surrounded by darkness

Image source: Getty Images.

1. Workiva ties organizations together

Digitizing operations means using an abundance of different applications. For instance, the pandemic accelerated the use of collaborative documents that can be accessed anywhere, because doing so allows employees to work together from remote locations. But that means critical data is often spread across different programs and in different locations. Workiva (NYSE:WK) provides tools to solve this problem.

The company's platform integrates with dozens of popular applications to link them together, giving organizations a way to access all of their data in one place. It's especially useful for aggregating financial information, which can then be used to submit regulatory filings, report earnings to the market, and manage internal audits.

Workiva serves 3,949 customers, including 75% of companies in the Fortune 500. But its customer base is growing fastest at the higher end of the spending curve, suggesting that more large customers are becoming interested in the products Workiva has to offer. 

Metric

Q2 2020

Q2 2021

Change

Overall customers

3,512

3,949

12%

Customers spending more than $100,000 annually

716

952

33%

Customers spending more than $150,000 annually

342

500

46%

Data source: Workiva.

Workiva's revenue growth has accelerated as more of these higher paying customers sign up, with a 29% increase in subscription revenue in Q2, outpacing annual revenue expansion. 

Metric

2018

2021 (Estimate)

CAGR

Revenue

$244 million

$431 million

20.8%

Data source: Workiva. CAGR = compound annual growth rate.

The company uses a software-as-a-service model which means the majority of its revenue comes from recurring subscriptions. In the second quarter, it had a revenue retention rate of 111.6%. When revenue retention is above 100%, it suggests the company is growing revenue just as much through cross-selling products to existing customers. It also means it is less reliant on acquiring new customers to expand the business. Workiva's customer base appears to be loyal, likely because they're satisfied with the company's products.

Because Workiva management is focused more on growing the company right now and sinking funds into expansion, marketing, and product research, it isn't profitable just yet. But its financials are trending in the right direction and analysts expect it could get there in 2022. The company operates on a very high gross margin (well above 70%) so it has some leeway to invest in growth because it can trim its expenses quite easily to generate net profits if it needs to.

With a market capitalization of $7.1 billion, the stock trades at a price-to-sales multiple of 16 times this year's projected revenue. That figure is normally high, but relatively in line with competitors and it reflects market confidence. With profitability potentially around the corner, now could be a good time to buy for the long-term potential of the company. 

Two people analyzing data on an enormous digital screen

Image source: Getty Images.

2. New Relic aggregates complex data

New Relic (NYSE:NEWR) focuses on a slightly different problem. It specializes in monitoring telemetry data.

For example, New Relic can offer insights into the customer experience on an e-commerce website, aggregating data from load times, server connections, and the ability to handle more traffic in busy periods. New Relic can identify the source of a given problem so it can be resolved more quickly, saving the time it takes to chase service providers one by one. 

On a more complex level, the company's products can bring together multiple applications for monitoring on one simple dashboard, which is an attractive proposition for larger organizations. 

New Relic has over 14,100 customer accounts, but just 964 of them account for 79% of all revenue. These are high-paying customers, each spending over $100,000 annually. Like Workiva, New Relic's revenue retention rate is hovering around 111% which is a sign of healthy, recurring demand from its existing customers.

Metric

Fiscal 2017

Fiscal 2022 (Estimate)

CAGR

Revenue

$263 million

$732 million

22.7%

Data source: New Relic. New Relic's fiscal year ends on March 31. CAGR = compound annual growth rate.

Revenue growth has been strong, although the $732 million of fiscal 2022 revenue the company is projecting represents just 10% growth compared to fiscal 2021. It's a deceleration compared to the compound annual growth rate of 22.7%, and this prompted the founder of the company to relinquish his role as CEO earlier this year in favor of a new independent manager, Bill Staples. 

In the recent fiscal Q1 earnings release, Staples identified his No. 1 priority as returning the company's revenue back to market growth rates. The good news is, you can buy the stock now at a price-to-sales multiple of just seven times, placing you in a great position to benefit from any performance improvement. 

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.