Although many tech stocks have seen their growth slow drastically, a few continue to post impressive growth numbers quarter after quarter. While these stocks usually fetch a hefty premium, the three I've identified as great buys have not.
So, if you want to add some growth stocks to your portfolio, look at one of these three as a possible addition.
1. CrowdStrike
Cybersecurity is a massive industry that will only grow as the frequency and severity of attacks ramp up. One of the leading providers of endpoint security (the branch that focuses on protecting devices) is CrowdStrike (CRWD 2.03%). CrowdStrike takes an artificial-intelligence-first approach and utilizes an ever-changing model that learns and upgrades itself every time one of its customers is exposed to an attack.
CrowdStrike also makes various other cybersecurity products, and its client base has scooped them up. As of its Q1 fiscal year 2024 (ending April 30), 62% of its customer base utilized five or more products. It has a large and quickly growing client base, rising 41% in FY 2023 (ending Jan. 31) to over 23,000 customers. Adding customers and getting existing ones to utilize more products helped CrowdStrike's business grow rapidly, showcased by its 42% annual recurring revenue (ARR) growth in Q1.
It's also slowly turning the profitability corner, posting its first quarterly profit in Q1 (although it was a mere $491,000). Considering the importance of the cybersecurity industry plus CrowdStrike's rapid growth rate, you'd think the stock would fetch a high premium -- but it doesn't. CrowdStrike trades for 14 times sales, a bargain for its rapid growth rates.
CrowdStrike is a screaming deal right now, and investors should be scooping up this industry leader if they want to add a growth stock to their portfolio.
2. Procore
Construction is one business that hasn't adopted much modern technology. However, Procore's (PCOR 0.39%) mission is to change that. Procore's construction management software links all parties of a project together. This allows the project owner to quickly glance at the financial status, engineers to flow down design changes, and contractors to receive the most up-to-date information. Procore improves project efficiency and reduces costly rework by creating a single point of truth.
Since debuting on the public market, Procore has steadily grown its revenue at a near-30% pace. Q2 was no exception, with Procore delivering another strong quarter of 33% growth. Procore is a much younger company than CrowdStrike, so it doesn't have the same focus on profits. As a result, Procore is neither free-cash-flow (FCF) positive nor net income positive.
PCOR Revenue (Quarterly YoY Growth) data by YCharts
Still, that shouldn't stop investors from getting in on this game-changing stock, especially when construction businesses are starting to adopt a more connected technology approach. With the stock trading for just 10 times sales, it's also an attractive buy at these levels.
3. UiPath
Automating repetitive tasks is one way businesses can do more with fewer (or the same) employees. If there's a repetitive task that requires constant clicking through programs to fill out information, like an expense report, then chances are UiPath (PATH 0.26%) can automate it.
UiPath is a robotic process automation (RPA) leader and a natural benefactor of the increased interest in artificial intelligence (AI). While RPA isn't exactly AI, UiPath can integrate various AI tools to increase the tasks that its RPA can automate.
Despite many companies cutting back on their enterprise software purchasing, UiPath grew its ARR by 28% in Q1 fiscal year 2024 (ending April 30). UiPath is between Procore and CrowdStrike in terms of profitability -- it is a FCF-positive company but is still losing money on a net income basis.
UiPath is still seeing significant customer growth, as the number of clients spending at least $1 million annually rose from 168 to 240 year over year. Despite this excellent growth, UiPath stock can be purchased for a dirt cheap 7.3 times sales. That's quite the affordable price tag on a rapidly growing stock with practical applications, and UiPath should be near the top of every investor's shopping list.
