Savvy investments in the right stocks can help to grow your wealth significantly. By parking your money in growth stocks with solid potential, you could see your money snowball into a much larger sum, perhaps in just a few years.
To have the potential for quick growth, a company needs to have several attractive characteristics, such as a growing client base, sustainable catalysts, and strong revenue growth. A solid brand that's gaining traction and recognition is also a plus.
With those things in mind, here are three stocks that have big-time near-term potential.
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MercadoLibre
MercadoLibre (MELI 3.09%) is Latin America's largest e-commerce retailer. The business also provides payment services, loans, and logistics services to its customers. MercadoLibre has demonstrated robust growth over the years and possesses good potential for growing its business by expanding its breadth of services and making them stickier.
Total revenue jumped from $4 billion in 2020 to $10.5 billion in 2022, with the company going from a small net loss to a net profit of $482 million over the same period.MercadoLibre also proved its ability to generate positive free cash flow for all three years.
The company's momentum has carried on in the first half of 2023. Revenue jumped 33% year over year (YOY) to $6.5 billion, while operating income surged 131% YOY to $898 million. The business set a quarterly operating income record for its second quarter at $558 million, more than double the $250 million in the prior-year quarter.
Net income for the first half soared 146% to $463 million. MercadoLibre generated positive free cash flow of $2.1 billion, more than quadruple the $438 million that was generated the year before.
Operating metrics also looked impressive. Unique active users went from 107 million to 135 million, while gross merchandise volume (the dollar value of transactions excluding classifieds) climbed 23% to $20 billion. MercadoLibre's platform supported 4 million payment transactions, a sharp leap from the 2.4 million logged a year ago, with the total payment volume jumping 42.4% YOY to $79 billion. The business continued to enjoy fast profit growth in its key countries of Brazil and Mexico, with increasing fulfillment penetration and healthy traction in its credit portfolio.
With its dominant position and ongoing expansion strategy, MercadoLibre looks set to report better results in the years ahead.
Datadog
Datadog (DDOG 4.95%) helps its cloud clients monitor and secure their applications and infrastructure through its platform. This accumulated data is used to gain insights for clients about their customers and to help avoid downtime. The company has experienced explosive top-line growth over the past several years, with revenue jumping from $603 million in 2020 to $1.7 billion in 2022. Despite sustaining losses, the business generated an average positive free cash flow of $229 million from 2020 to 2022.
The first half of 2023 has seen Datadog continue to grow its top line and improve its free cash flow generation. Revenue climbed by 29% to $991 million, while free cash inflow jumped by 36% YOY to $258 million for a free cash flow margin of 26%. Total customers have continued to grow, starting with just 5,400 in 2017 and ending at around 26,100 for Q2 2023. Crucially, the company's customers providing more than $1 million in annual recurring revenue (ARR) have multiplied more than 28-fold from just 11 to 317, demonstrating that customers are not just growing but also spending more on its platform.
Another sign that customers are liking Datadog's offerings comes from the proportion of customers using six or more of the company's products, which has risen from just 6% two years ago to 21%. The company estimates that its current total addressable market stands at $45 billion and is poised to grow to $62 billion by 2026.
Cloud spending hit $400 billion in 2021 and constitutes around 9% of total information technology (IT) spending. By 2026, cloud spending is projected to more than double to $1 billion and comprise nearly 17% of all IT spending. These catalysts will act as strong tailwinds for Datadog and allow it to continue growing its business.
Asana
Asana (ASAN 3.15%) helps organizations manage and organize their workflow, improve productivity, and collaborate more effectively. The company has enjoyed steady growth over the past few years as more customers sign on seeking to improve their workflows and processes.
Revenue leapt from $227 million in fiscal 2021 (ending Jan. 31) to $547 million in fiscal 2023. For the first half of fiscal 2024, revenue continued climbing, improving by 23% YOY to $315 million.
On the customer front, the number of customers spending more than $5,000 jumped 15% YOY to 20,782, while those spending more than $100,000 climbed 20% YOY to 553. Asana runs a subscription-based business model with robust gross margins exceeding 90%, and uses its land-and-expand strategy to increase the use cases among its existing clientele.
The latest quarter also saw Asana sign up some of the largest companies in the world in the financial services, healthcare, retail, media, and manufacturing sectors. Asana has also incorporated artificial intelligence into its Asana Intelligence software to help organizations work better. The company is slated to hold its Investor Day on Oct. 3, where it will unveil more details of its growth strategies and how it will chart its path in the years ahead. I think there's a lot of opportunity for the company and am excited to see how it continues to thrive.
