Cloud computing makes it possible to access infrastructure and software through the internet, which eliminates the cost and complexity of maintaining those solutions in private data centers. So businesses are quickly moving resources to the cloud in an effort to improve operational efficiency.

Grand View Research estimates the cloud computing market will increase at 14% annually through 2030, and while many companies will benefit from that trend, Cloudflare (NET 0.18%) stands out from the pack. The company has demonstrated a remarkable capacity for innovation and has delivered solid financial results on a consistent basis, yet it has hardly scratched the surface of its addressable market.

To that end, Cloudflare shareholders could see fivefold returns by the end of the decade. At that pace, $200,000 invested in the stock today would be worth $1 million by 2030.

Cloudflare makes the internet faster and safer

Cloudflare offers a broad range of cloud services that improve the performance and security of applications and infrastructure. The company also provides computing and storage solutions that allow businesses to build software, websites, and streaming experiences. Cloudflare claims to have a considerable competitive advantage by asserting that it runs the fastest cloud network and developer platform on the market.

That advantage stems from a unique network architecture 12 years in the making. Its servers share a direct connection with 11,500 other networks, including every major internet service provider, cloud vendor, and enterprise. That allows its network to deliver content to 95% of internet users within 50 milliseconds. Even hyperscale public clouds have difficulty replicating those results.

But Cloudflare has another secret weapon. Its freemium pricing strategy brought a tremendous amount of web traffic to the network, giving the company unprecedented insight into the health and performance of the internet. In fact, more than 20% of the web relies on at least one Cloudflare security service. That affords the company a deep understanding of cybersecurity threats.

Cloudflare is chasing a large market opportunity

Cloudflare estimates its total addressable market at $125 billion in 2023. That figure is the sum of three smaller opportunities that span application services, zero-trust services, and developer tools.

Application services: Cloudflare is often thought of as a content delivery network (CDN) because its platform accelerates and secures applications and websites. Indeed, those services represent the most mature part of its portfolio, and industry analysts have recognized the company as a leader in CDN software, web application and API protection, and web application firewalls. But management says those products are merely its first act, and investors should realize that Cloudflare is much more than a CDN vendor.

Zero-trust services: Cloudflare One is a secure access service edge (SASE) product that blends network and security services. It allows users to quickly and securely access private software, public clouds, and the open internet from any device or location. Cloudflare goes head-to-head with Zscaler in this market, but Cloudflare says its SASE platform is faster and that its customer win rates are strong. The company should have no trouble gaining share in this space given its ability to source security data from across the internet.

Developer tools: Cloudflare Workers is an edge development platform that allows businesses to write code and build applications on Cloudflare's network. Forrester Research recognized Cloudflare as the leader in edge development platforms in the fourth quarter of 2021, citing a stronger product and a stronger growth strategy than other vendors. Cloudflare has since reinforced its leadership position with two storage solutions: R2 Storage and D1.

R2 Storage allows developers to incorporate unstructured data like photos, videos, and graphics into their applications. Cloudflare markets R2 as a faster and more cost-effective version of Amazon's S3 Storage.

Similarly, D1 is a managed database that lets developers incorporate structured data into their applications without worrying about the underlying infrastructure. Those products make the Workers platform more useful for developers. Rather than provisioning third-party storage solutions, developers can now rely entirely on Cloudflare.

Cloudflare is executing on its market opportunity

Despite a difficult economic environment, Cloudflare continued to post impressive financial results last year. Its customer base increased 16%, and the average customer increased its spending by 22%. In turn, revenue climbed 49% to $975 million, and cash from operations rose 91% to $124 million.

But the company has hardly scratched the surface of its addressable market, and management believes revenue will organically increase fivefold in the next five years. That means Cloudflare expects current product revenue to grow at 38% annually through 2027. But the company has been incredibly innovative in the past, and it will undoubtedly bring new products to market in the coming years, implying that its top line could actually grow even faster.

Currently, shares trade at a somewhat pricey 19 times sales, though that valuation is a bargain compared to the three-year average of 41.9 times sales. If the company can grow revenue at 30% annually through the end of the decade -- a reasonable estimate given its five-year financial target --- its share price could grow fivefold, and its valuation could drop to a more reasonable 11.8 times sales. That's why this growth stock is worth buying today.

As a final thought, investors should always keep portfolio diversification in mind. Very few people have a portfolio large enough to warrant a $200,000 investment in a single stock, but the prospect of fivefold returns is compelling regardless of the initial sum invested.