7 months ago
96
Growth investing requires you to place your money in promising businesses with great long-term potential. You need to pick out companies with proven track records, sustainable tailwinds, and competent management teams.
These stocks should see their share prices rise steadily over time, netting you significant capital gains to help you achieve your retirement dreams. You just need the patience to see your investments grow over the years or even decades.
The technology and software-as-a-service sectors are great places to start looking for businesses that can grow their top and bottom lines and free cash flow. Some of these stocks might be beaten down in the short term due to unmet expectations, making them enticing buys if you can hold through the volatility.
Here are three software companies that I believe could see their share prices soar as they continue to grow.
1. Snowflake
Snowflake (NYSE: SNOW) has a software-as-a-service platform that allows organizations to collate disparate data sets to perform data analytics. The company saw its shares plunge sharply when it released a weak sales outlook for fiscal 2025 and announced the retirement of its CEO, Frank Slootman, who was replaced by Sridhar Ramaswamy, a veteran executive at Alphabet's Google.
Investors should look past this dip and be impressed by Snowflake's steady growth over the years. Revenue more than doubled from $1.2 billion in fiscal 2022 to $2.8 billion in fiscal 2024.
Gross profit did even better, rising from $760.9 million to $1.9 billion over the same period, while its gross margin went up from 62.4% to 68%. Free cash flow improved dramatically over these three years, going from $81.1 million in fiscal 2022 to $778.9 million in fiscal 2024.
The numbers continued to impress for the first half of the current fiscal year. Revenue rose 30.8% year over year to $1.7 billion, while gross profit improved by 30.7% to $1.1 billion. Free cash flow of $390.4 million was up around 11% from a year ago.
The software company's remaining performance obligations (RPO) climbed by 47% year over year to $5.2 billion, signaling healthy top-line growth in the year ahead. The total customer count jumped 47.8% year over year to 5,231 in the second quarter of 2025, while customers that contributed more than $1 million in product revenue went from 399 to 510 over the same period.
Management believes that its total addressable market of $152 billion as of 2023 will more than double to $342 billion by 2028. This large market size will provide ample opportunities for Snowflake to continue its impressive growth in revenue and free cash flow.
