One of the best ways to grow your wealth is to invest in growth stocks and hold them over the long term. By doing so, you can enjoy steady capital appreciation as you witness the rise in the value of your investment portfolio. The key is to have the patience to own these stocks over years or even decades as they grow their revenue, profits, and free cash flow. As the business becomes more valuable, its share price should also naturally increase in tandem.
What are the criteria for choosing such solid growth stocks, you may wonder? You should select businesses that possess a strong competitive edge with a recognizable brand and that boast a healthy track record of growing their revenue and profits. They should ideally also communicate a strategy to achieve long-term growth, and enjoy a large total addressable market (TAM) that supports many years of steady growth.
Here are three attractive growth stocks you can look to add to your investment portfolio.
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1. Lululemon
Lululemon (LULU +1.40%) is a manufacturer and seller of sports apparel and footwear used for activities such as yoga, running, and other sweaty pursuits. The company reported both rising revenue and profits from fiscal 2022 to 2024, powered by its "Power of Three x2" strategic plan. An earlier "Power of Three" plan in 2019 allowed the apparel retailer to achieve its goals two years early, which led to the announcement of a second five-year plan to double its fiscal 2021 revenue of $6.5 billion by 2026. The table below shows Lululemon's track record in growing both its top and bottom lines.
| Metric | 2022 | 2023 | 2024 |
|---|---|---|---|
| Revenue | $6.257 billion | $8.111 billion | $9.619 billion |
| Operating income | $1.333 billion | $1.328 billion | $2.176 billion |
| Net income | $975.322 million | $854.8 million | $1.550 billion |
Data source: Lululemon. Fiscal years end Jan. 31.
The yoga apparel maker not only saw its net income rise steadily over this period, it also churned out consistently higher free cash flow. Free cash flow went from $994.6 million to $1.6 billion from fiscal 2022 to fiscal 2024.
NASDAQ: LULU
Key Data Points
Lululemon's momentum has continued into the first three quarters of fiscal 2025. Revenue rose 8.8% year over year to $6.98 billion, while operating income climbed 20.1% year over year to $1.46 billion. Net income stood at $1.07 billion for the period, up 21.1% year over year. The company continued to churn out a positive free cash flow of $417.1 million.
Overall, comparable store sales for the company increased by 4% for the third quarter of fiscal 2025. Although the American region saw a comparable store sales decline of 2%, the 25% surge for Lululemon's international division more than made up for it. During the quarter, Lululemon opened 28 new company-operated stores, taking its total global store count to 749.
The business recently raised its guidance for its fourth quarter, with net revenue expected to be in the range of $3.56 billion to $3.58 billion, representing a year-over-year growth of 11% to 12%. This range is above the previously guided range of $3.475 billion to $3.51 billion. Lululemon also upped its forecast for earnings per share to $5.81 to $5.85 for the quarter, up from the previous range of $5.56 to $5.64.
Management will continue to focus on the three key pillars of its "Power of Three x2" strategy -- product innovation, customer experience, and international market expansion -- to help the business post steady growth in both revenue and profits.
2. FactSet
FactSet (FDS +0.97%) operates a digital platform that delivers financial data and analytics to more than 8,200 global clients, including wealth managers, private equity firms, and buy-side and sell-side investment firms. Over the years, FactSet has steadily grown its business, as evidenced by the increases in revenue and net income as shown in the table below.
| Metric | 2022 | 2023 | 2024 |
|---|---|---|---|
| Revenue | $1.844 billion | $2.086 billion | $2.203 billion |
| Operating income | $475.482 million | $629.207 million | $701.299 million |
| Net income | $396.917 million | $468.173 million | $537.126 million |
Data source: FactSet. Fiscal years end Aug. 31.
The financial data provider also generates consistent positive free cash flow, and this free cash flow increased from $487.1 million in fiscal 2022 to $614.7 million by fiscal 2024. FactSet also saw its quarterly dividend rise without fail for more than two decades, with the latest quarterly dividend coming in at $1.04 per share, up 6.1% year over year. Shares of the company thus provide you with an attractive mix of growth and dividends.
NYSE: FDS
Key Data Points
The company continued to grow its top and bottom lines in the first quarter of fiscal 2025 ending Nov. 30, 2024. Revenue rose 4.9% year over year to $568.7 million, while operating income inched up 1.2% year over year to $191.3 million. Net income came in 1% higher than the prior year at $150 million, and the business once again generated a positive free cash flow of $60.5 million for the quarter. Annual subscription value (ASV), a measure of forward-looking revenue for the next 12 months for all of FactSet's subscription services, rose 4.9% year over year to $2.27 billion.
The business is growing on two fronts -- through bolt-on acquisitions that help to increase its platform capabilities, and through the innovative introduction of new features that should attract more customers. FactSet acquired Idacity, a company dealing with data structuring and collection technology, in July 2023. More recently, in October 2024, the company acquired Irwin, an investor relations and capital markets services provider for public companies. These tuck-in acquisitions help to boost FactSet's capabilities and better position the company to offer a comprehensive suite of services to existing and potential customers.
Late last year, FactSet announced the integration of conversation artificial intelligence into its platform to enable customers to enjoy higher productivity while enhancing their decision-making capabilities through more efficient workflows.
During last year's Investor Day, management identified a massive total addressable market of more than $40 billion, which continues to grow as the company adds more products and services to its portfolio. Based on this number, there is still significant room for FactSet to increase its profits and dividends in the years to come.
3. Full Truck Alliance
Full Truck Alliance (YMM +0.34%) operates a digital platform that connects shippers with truckers and offers a range of services such as freight matching, freight brokerage, and online transaction services. The company is adept at using technology to revolutionize the supply chain and enhance logistics networks. Growth has been rapid as shown in the table below, with revenue surging ahead from RMB 4.7 billion in 2021 to RMB 8.4 billion by 2023. The business went from a net loss in 2021 to generating an impressive net income of RMB 2.2 billion in 2023.
| Metric | 2021 | 2022 | 2023 |
|---|---|---|---|
| Revenue | RMB 4.657 billion | RMB 6.734 billion | RMB 8.436 billion |
| Operating income | (RMB 3.796 billion) | (RMB 162.002 million) | RMB 997.429 million |
| Net income | (RMB 4.173 billion) | RMB 406.762 million | RMB 2.212 billion |
Data source: Full Truck Alliance. Fiscal years end Dec. 31. Note: RMB = Renminbi; 1 RMB is worth about $0.14 at current exchange rates.
On the cash flow front, Full Truck Alliance has also done well. Operating cash flow stayed negative for both 2021 and 2022 but turned positive in 2023 at RMB 2.27 billion, and the business generated its first free cash flow of $2.17 billion in three years.
NYSE: YMM
Key Data Points
Full Truck Alliance continued to report strong financial numbers for the first nine months of 2024. Revenue climbed 33.8% year over year to RMB 8.06 billion, while operating income more than doubled year over year to RMB 1.64 billion. Net income stood at $2.5 billion, surging by 54% year over year.
Operating statistics were also encouraging, with the average shipper monthly average users (MAUs) jumping 33.6% year over year to 2.84 million and fulfilled orders rising 22.1% year over year to 51.9 million. The increase in volume attests to the attractiveness of Full Truck Alliance's platform and its ability to consistently match shippers to truckers to enable the smooth flow of goods.
The company enjoys powerful network effects that make customers sticky and attract new customers. As it becomes easier for shippers to find truckers, truckers will enjoy better utilization and earn more. Shippers can thus handle more orders and get better matched to truckers, while truckers suffer fewer empty miles, creating a win-win scenario for both parties.
During 2023's Investor Day session, management identified a massive total addressable market -- China's road transportation market is worth around RMB 7 trillion. Of this amount, close to RMB 5.5 trillion is for "full-truckload" (FTL) and "less-than-truckload" (LTL) logistics, with the remainder being express deliveries.
Of the RMB 5.5 trillion, around RMB 3 trillion represents non-contracted spot demand with huge potential to be tapped for online penetration. The size of this market should enable Full Truck Alliance to post continued growth for many years as it eases the pain points for both shippers and truckers.
