Appian (APPN 1.00%) has certainly fallen out of favor with investors recently. The stock is down by more than 85% from its all-time high and has lost more than half of its value over the past year alone.

However, to say that I'm still a long-term believer in the company would be an understatement. The provider of low-code app development software could still have a very bright future ahead of it, and of all the beaten-down growth stocks in my portfolio, it's my favorite as we head into 2023. Here's why.

A massive market that's in the early stages

Now more than ever, businesses, government agencies, schools, and other organizations need applications to automate processes, improve customer experiences, and drive efficiency. But one major problem is that traditional means of development -- such as hiring a team of in-house developers -- can be prohibitively costly. Companies such as T-Mobile and GlaxoSmithKline use Appian, as do several U.S. government agencies.

It's clear that customers are finding value. Appian's cloud subscription business has a 99% gross renewal rate. And the 115% revenue retention rate indicates that its subscribers are spending more money with Appian over time.

In all, Appian sees a $60 billion addressable revenue opportunity in all of its software categories, and its trailing-12-month revenue is about 0.7% of that. This is a business that could multiply several times over and still have a massive opportunity ahead of it.

And $60 billion is the current market size -- the need for apps and process automation is likely to grow rapidly.

Strong growth, but profits aren't there yet

Appian's growth hasn't been as exciting as many other high-growth tech companies, but it is still impressive, given the difficult economic climate. In the third quarter of 2022, Appian's revenue grew by 28% year over year, including 30% growth in cloud subscription revenue, the most important piece of the puzzle when it comes to long-term profitability. In fact, Appian's subscription revenue has a stellar 90% gross margin.

Speaking of profitability, the biggest negative is that Appian doesn't have any. Even on an adjusted basis, Appian lost about $31 million in the third quarter, roughly double its adjusted net loss in the third quarter of 2021. To be fair, Appian CEO Matt Calkins specified that the higher loss was due to "pull forward hiring," and that losses should be reduced to about 10% of revenue by the second half of 2023.

Even so, this translates to an adjusted EBITDA loss of about $12 million per quarter. With $92.7 million in cash and investments on the balance sheet, clarity in the path to profitability is needed sooner rather than later.

There could be an influx of cash coming

Another big part of the investment thesis with Appian is the pending $2 billion judgement the company was recently awarded from rival Pegasystems for improperly stealing trade secrets.

To be sure, there's a long way to go before Appian will be cashing any checks. There's an appeals process that will likely drag on for some time, and Pegasystems doesn't have to pay a dime until all appeals are exhausted.

However, there's a strong likelihood that the judgement will ultimately be upheld, and in the meantime, the judgement accumulates interest at the rate of 6% per year. For context, Appian's entire market cap is currently $2.4 billion, so this could be a big windfall for shareholders.

An early-stage play on a major opportunity

With Appian's stock trading for just over 5 times sales, despite excellent growth, incredible margins, and a huge market opportunity, there's a lot to like about it. And that doesn't even consider the pending judgement that would add billions to its balance sheet.

To be sure, Appian isn't without risk, but this could be a home run if management continues to execute on its growth strategy.