Some investors cannot wait for 2022 to end. After all, many of them saw large price drops on at least some of their holdings. But 2022 also offered opportunities for some investors as many pricey stocks suddenly became considerably better values than they were in 2021's bull market. While some of these stocks were admittedly overvalued, there were also a select group of fantastic companies with prosperous futures that saw their stock prices fall steeply even though their underlying businesses remained strong.  

During this downturn, long-term investors buying into these companies are likely to be rewarded for maintaining their disciplined investment strategies, like dollar-cost averaging. As Morgan Creek Capital Management founder Mark Yusko once said, "Only in the stock market do people run out of the store when things go on sale." The quote offers a terrific reminder for investors just in time for the holiday shopping season. 

Three growth stocks with tremendous profit potential right now are Cloudflare (NET 1.80%), Adobe (ADBE 0.68%), and CrowdStrike (CRWD -0.24%). Let's take a closer look at these screaming buys.

1. Resilient results at Cloudflare

Cloudflare's network-as-a-service (NaaS) solves two significant headaches for its customers: Poor performance and costly on-premises hardware. The transfer of data has a speed limit and it's noticeable over long distances. This can result in poor performance on the network. Cloudflare has built data centers in 275 cities and more than 100 countries around the world to help with this distance issue, bringing 95% of internet users within 50 milliseconds of the services they rely on.

The company's platform also allows customers (mainly internet companies) to eliminate costly redundant hardware. Gone are the days when businesses need massive server rooms constantly buzzing in the basement. It's all outsourced to providers like Cloudflare. The market opportunity is gigantic, as Cloudflare estimates an addressable market of well over $100 billion moving forward.

Cloudflare has several enviable metrics, like a 76% gross margin and 156,000 paying customers. Still, it needs to expand its large customer pool (those paying more than $100,000 annually) to achieve its long-term goals. This large customer subset has grown 62%, compounded annually since 2019, and it totaled 1,908 in the third quarter. These favorable metrics resulted in massive revenue expansion, with sales expected to reach $974 million in fiscal 2022, as shown below.

Chart showing growth in Cloudflare's revenue since 2016, and steady YoY growth since 2018.

Data source: Cloudflare. Chart by author.

Despite the great performance, Cloudflare's stock is down more than 77% from its 52-week high. It's trading at its lowest price-to-sales (P/S) ratio (16.5) since shortly after its 2019 IPO.

Patient growth investors who are OK with a bit of short-term volatility may want to consider a position in Cloudflare at these levels.

2. Was Adobe stock unfairly punished?

Adobe stock is down 42% year to date and more than 52% from its 52-week high. Much of this drop happened after Q3 earnings and a September announcement that it plans to acquire Figma. Figma is a cloud-based design software that allows multiple users to edit in real-time. It competes directly with Adobe XD and is growing like a weed.

Adobe is paying $20 billion for Figma, which is about 50 times its forecasted 2022 sales. On the surface, this seems like an extremely overpriced offer. However, it's a case of paying a lot now or potentially paying dearly in the future. The word is that Microsoft's designers, developers, and marketers don't just like Figma -- they love it. And they aren't alone. If Adobe doesn't act now, it risks losing tremendous market share to Figma or having it acquired by a deep-pocketed competitor. Figma's sales are expected to double this year. It has a 90% gross margin and is cash-flow positive. The deal looks expensive now but could be seen as a bargain when we look back on it in a few years. 

Adobe's creative, document, and experience clouds are growing, and its financial results are solid. Through the first three quarter of fiscal 2022 (ended Sept. 2), Adobe posted record revenue of $13.1 billion and an operating profit of $4.6 billion.

The stock is trading near its lowest price-to-earnings (P/E) ratio in many years, as shown below.

Chart showing Adobe's PE ratio falling since mid-2020.

ADBE PE Ratio data by YCharts

The stock drop looks excessive, meaning new long-term stockholders could profit handsomely when it recovers.

3. CrowdStrike finds cybersecurity is recession-resistant

Businesses are looking to cut back on expenses as inflation and a possible coming recession eat into profits. But one area it would be unwise to cut is cybersecurity. Breaches, ransomware, and downtime are expensive headaches that companies, governments, and infrastructure providers can ill afford. This is part of why many expect cybersecurity companies will continue to flourish. 

CrowdStrike's cloud-based Falcon platform is used by more than half of the Fortune 500 -- nearly 20,000 customers overall -- and has annual recurring revenue (ARR) of over $2.1 billion as of the second quarter of fiscal 2023 (ended July 31). As shown below, the company's rise has been eye-popping.

Chart showing large growth in CrowdStrike's ARR and customers since Q4 2018.

Data source: CrowdStrike. Chart by author.

CrowdStrike isn't producing GAAP profits yet. But it has many encouraging financial metrics that growth investors look for, such as positive free cash flow ($442 million in fiscal 2022 and $293 million through Q2 of fiscal 2023), a high gross margin (over 75%), and shrinking operating expenses as a percentage of sales. 

The stock price is down 40% this year and trades at its lowest P/S ratio since the depths of the pandemic, offering good value to long-term shareholders.

Strong candidates for a growth stock portfolio

Growth stocks are out of favor this year, which should be music to the ears of long-term growth buffs. These three companies offer an excellent mix of industries, growth, profits, and innovation, making them strong candidates for inclusion in a growth stock portfolio.