Every well-diversified portfolio will likely contain a few big winners, and Cloudflare (NET 0.23%) and Riskified (RSKD 2.25%) could meet that definition over the next decade. In fact, shareholders could see fivefold returns during that time period, meaning $200,000 split between both growth stocks today could be worth $1 million by 2033.

Of course, very few people have the financial means to invest $100,000 into a single stock, but the prospect of fivefold returns is attractive regardless of the initial sum invested. Here's why Cloudflare and Riskified are worth buying.

1. Cloudflare

Cloudflare provides application and network services that improve the performance  and security of software and infrastructure, while eliminating the cost and complexity of on-premises network hardware. The company also provides developer tools and storage solutions that allow businesses to build performant applications and websites directly on its network.

Cloudflare's competitive advantage is straightforward: It operates the fastest cloud network and developer platform in the world. Its infrastructure connects directly to every major internet service provider and cloud vendor, and most major enterprises, allowing Cloudflare to deliver content to 95% of internet users worldwide within 50 milliseconds. That competitive edge has helped it achieve a strong presence in several cloud services verticals. For instance, Cloudflare is a leader in content delivery network software, edge development platforms, and web application firewalls. More broadly, approximately 20% of the internet (including free and paid users) relies on at least one Cloudflare service.

Over the past year, its customer count climbed 16% to 162,000, and the average customer spent 22% more. In turn, revenue soared 49% to $975 million and the company reported non-GAAP (adjusted) net income of $0.13 per diluted share, up from a non-GAAP loss of $0.05 per diluted share in the prior year. Investors can confidently expect that momentum to continue.

Cloudflare recently achieved an annual revenue run rate of $1 billion, but management says that figure will increase fivefold in the next five years, implying annualized revenue growth of 38% through 2027. Moreover, management believes that target is attainable with its current product portfolio, meaning revenue could actually grow faster as the company brings new products to market.

Cloudflare stock currently trades at 22 times sales, a discount to the three-year average of 42 times sales, but a pricey valuation all the same. However, if Cloudflare can grow revenue at 25% annually over the next decade -- a reasonable assumption given management's five-year financial target -- the stock could produce fivefold returns while its valuation falls to a much more reasonable 12 times sales. That's why this supercharged growth stock is worth buying.

2. Riskified

Riskified uses big data and artificial intelligence (AI) to solve the problem of e-commerce fraud. The company believes traditional risk management systems are often inaccurate, meaning legitimate transactions are regularly declined and illegitimate transactions are regularly approved. That translates into lower revenue and higher costs for online merchants.

In fact, Riskified cites the following data points to support the value of its services: 

  • Edgar, Dunn & Company estimates that businesses lost $720 billion in revenue due to false declines last year.
  • Juniper Research estimates businesses will incur $25 billion in fraud-related expenses by 2024.

Riskified engineered its platform to capture richer data than legacy systems. It leans on AI to correlate consumer behavior with fraud, measuring hundreds of buyer attributes against more than a billion historical transactions. That results in fewer false declines and chargebacks for merchants, which translates into more sales and lower costs. In fact, Riskified's 10 largest merchants have reported an 8% increase in revenue and a 39% decrease in fraud-related operating expenses.

Riskified reported unremarkable financial results last year. Its top line grew more slowly than investors might have hoped, but high inflation challenged the broader retail industry last year, so the deceleration was not particularly surprising. Revenue climbed 14% to $261 million and the company reported a non-GAAP profit of $5 million, up from a loss of $7 million in the prior year. But Riskified should be able to accelerate growth as the economic backdrop improves.

Despite having allegedly superior technology, the company has hardly put a dent in its addressable market. Last year, its gross merchandise volume (GMV) of $106 billion represented less than 2% of the $5.7 trillion in global retail e-commerce sales. But its GMV still jumped 18% from the prior year, topping the 7% growth in the broader market, meaning Riskified is gaining market share.

Riskified stock currently trades at 3.5 times sales, which is a discount to its historical average of 6.2 times sales. That valuation looks reasonable given its growth prospects. In fact, if Riskified can increase revenue at 18% annually over the next decade -- a reasonable assumption given that Ameco Research believes online retail sales will increase at roughly 14% annually through 2030 -- its market capitalization could increase fivefold with no change in its price-to-sales ratio. That's why investors should buy a few shares of this growth stock today.