Data cloud specialist Snowflake (SNOW 3.69%) has been a winner for some investors and a loser for others, depending on when they bought it. Since its initial public offering at $245 in 2020, shares have floundered.

The stock trades a few percentage points below this level today, more than three years later. But for investors who bought sometime between late 2022 and in 2023, shares have surged. The stock is up more than 60% since the beginning of 2023 and 16% year to date, trouncing the S&P 500 in both periods.

As the stock inches closer to the price it started trading at in 2020, is it time to take profits, or are shares worth holding on to? The answer to this question may not become apparent until after the company reports fiscal fourth-quarter results on Wednesday.

Here are two key things Snowflake must deliver to live up to its stock's premium valuation.

1. Stabilizing growth

The first thing Snowflake needs to deliver to shareholders to live up to its $76 billion market capitalization is a stabilization in its decelerating top-line growth rates. The tech company's reported year-over-year revenue growth rates have been decelerating for years. Revenue in its most recently reported quarter, for instance, rose 32% year over year, down substantially from the 67% growth the company delivered in the year-ago period.

But there have been signs that Snowflake's decelerating top-line growth could stabilize soon.

"Consumption trends have improved," said Snowflake chief financial officer Michael Scarpelli in the company's fiscal third-quarter earnings call. "We are seeing stability in customer expansion patterns."

Since the company reports product revenue based on usage (sometimes referred to as consumption) of its data cloud platform, these customer trends bode well for Snowflake's revenue potential.

Investors should look for Snowflake's fiscal fourth-quarter revenue growth rate to be nearly in line with the 32% growth it reported in fiscal Q3. Achieving this would imply that the company might deserve its high valuation, as it could indicate that its massive revenue growth story is still in its early innings, as management often implies.

2. Bottom-line momentum

But investors should be watching more than Snowflake's top-line momentum when the company reports earnings next week. Its progress on profitability metrics like net income and gross margin are equally important to the long-term bull case for this growth stock.

In one aspect related to profitability (gross margin), Snowflake just needs to keep on doing what it's already doing. Its gross margin is already impressive, coming in at 68% for the nine-month period ended Oct. 31. Even better, this is an improvement from 65% in the same period one year earlier.

But the company's net losses are still moving in the wrong direction. Snowflake's net loss per share for the nine months ended Oct. 31 was $2.04 -- wider than a net loss per share of $1.86 in the same nine-month period one year earlier. Its fiscal third-quarter net loss per share of $0.65 also widened from $0.63 in the year-ago period.

Therefore, in addition to looking for stabilizing revenue growth rates to justify its stock's current valuation, investors should also look for continued gross margin expansion and year-over-year improvements in net loss per share.

Snowflake is scheduled to report its fiscal fourth-quarter results after market close on Wednesday, Feb. 28.