While a well-balanced portfolio between growth and value stocks in multiple sectors is the best option for most investors, looking for the next greatest growth stock tends to provide a bit more excitement. Because of the potential of these companies, it's fun to watch them compound and become a dominant force in their industry while making money for you as a shareholder along the way.
If you are looking for a little excitement in your portfolio picking, you might want to consider adding these three growth stocks. Each has explosive potential.
The future is bright for this trio
The three stocks I'm excited about are UiPath (PATH 0.26%), DLocal (DLO 0.56%), and CrowdStrike (CRWD 2.03%). Each operates in a completely different industry and each has multiple tailwinds blowing in its favor.
UiPath is a leader in the robotic process automation (RPA) space. This software allows its users to record everyday tasks and then determines which can be automated. This is incredibly useful for filling out expense reports, legal documents, and other repetitive tasks.
While RPA is a powerful technology as is, integrating artificial intelligence into the platform supercharges its potential. Instead of mindlessly plugging away at a task, RPA is now more intelligent and can comb through emails and documents to have smarter options, as well as monitor employees to identify repetitive tasks that may be difficult to pinpoint if they seem complex.
Currently, the RPA market opportunity is fairly small at around $2.7 billion. However, it's expected to drastically expand to $66 billion by 2032, according to Polaris Research. With UiPath being a leader in this space, it's poised for explosive upside.
DLocal's products bridge the gap between countries with less developed financial systems and some of the biggest names in commerce. Instead of businesses like Shopify, Amazon, Uber Technologies, and Nike developing their own payment solutions for countries like Saudi Arabia, Tanzania, India, or Peru, they utilize DLocal's system for a small fee and can expand their reach to all areas of the globe.
With e-commerce maturing in most developed countries, many companies are looking outside their borders to expand operations and capture market opportunities in emerging markets. This trend will help DLocal significantly as its products grow.
CrowdStrike is a leader in endpoint cybersecurity and has other products to expand the reach of its Falcon platform. CrowdStrike pioneered using a threat graph, which utilizes artificial intelligence and machine learning to understand what is normal activity and what is a threat. Then, after it detects a threat, it can quickly shut it down before a network can be breached. After the attack concludes, CrowdStrike's platform automatically sends the digital signature of that threat to other CrowdStrike users so they aren't affected by the same vulnerability.
Cybersecurity is a major focus for many management teams due to high-profile attacks on many companies. With CrowdStrike's market opportunity expected to grow from $76 billion today to $158 billion by 2026, it also has explosive upside.
Each trio member has a compelling story, but do the finances make sense?
Each company is executing at a high level
All three of these companies experienced rapid growth in their most recent quarters, further backing up the claim of their explosive potential.
CRWD Revenue (Quarterly YoY Growth) data by YCharts.
The future looks bright for each company.
| Revenue Estimates | CrowdStrike | UiPath | DLocal |
|---|---|---|---|
| This fiscal year | $3.04 billion | $1.28 billion | $648 million |
| Next fiscal year | $3.91 billion | $1.52 billion | $902 million |
| Two fiscal years from now | $4.9 billion | $1.78 billion | $1.17 billion |
Data Source: YCharts.
Most of the time, these growth rates result in deep unprofitability. But two of the three companies are profitable. DLocal, despite being the smallest, has been posting great profits for a while. Over the past four quarters, its profit margin was 25%. CrowdStrike is just turning profitable, with the last two quarters being its first profitable quarters in company history. UiPath is the outlier in this trio, as it is still far from breaking even. But it is free-cash-flow positive, so it can self-fund without needing to seek a loan or issue more shares.
As for valuations, these stocks aren't necessarily cheap.
CRWD PS Ratio data by YCharts
Except for UiPath, the stocks fetch a fairly high premium when assessed from a price-to-sales ratio standpoint. But with the explosive market opportunities in front of them coupled with fast-growing businesses, I'm not concerned about the prices you have to pay today to take advantage of these companies with incredible upside.
I think all three stocks are great buys today, and investors should incorporate them into a well-balanced portfolio.
