Growth investing requires you to put money into promising businesses with good long-term potential. You should choose a company with a proven track record, sustainable tailwinds, and a competent management team.
These stocks should see their share price rise steadily over time, earning you significant capital gains to help you achieve your retirement dreams. You just need patience to see your investment grow over years or even decades.
The technology and software-as-a-service sectors are great places to start looking for businesses that can grow your top and bottom lines and free cash flow. Some of these stocks can be beaten in the short term due to unrealistic expectations, so they can be attractive if you can handle the volatility.
Below are three software companies that I believe could see their stock prices rise as they continue to grow.
1. Snowflake
Snowflakes (NYSE: SNOW) has a software-as-a-service platform that allows organizations to aggregate disparate data sets to perform data analytics. The company saw its shares fall sharply when it issued a weak sales outlook for fiscal 2025 and announced the retirement of CEO Frank Slootman, who was replaced by Sridhar Ramaswamy, a veteran executive at AlphabetGoogle it.
Investors should look past this decline and be impressed by Snowflake’s stable growth over the years. Revenue more than doubled from $1.2 billion in fiscal 2022 to $2.8 billion in fiscal 2024.
Gross profit was even better, rising from $760.9 million to $1.9 billion in the same period, while gross margin rose from 62.4% to 68%. Free cash flow has grown significantly over the past three years, from $81.1 million in fiscal 2022 to $778.9 million in fiscal 2024.
These numbers continue to impress for the first half of the current fiscal year. Revenue increased 30.8% year over year to $1.7 billion, while gross profit increased 30.7% to $1.1 billion. Free cash flow of $390.4 million was up about 11% from a year ago.
The software company’s outstanding performance obligations (RPO) rose 47% year-over-year to $5.2 billion, signaling healthy top-line growth next year. The total number of customers increased 47.8% year-over-year to 5,231 in the second quarter of 2025, while customers contributing more than $1 million in product revenue rose from 399 to 510 during the same period.
Management believes that the total addressable market at $152 billion in 2023 will more than double to $342 billion in 2028. This large market size will provide Snowflake with ample opportunity to continue to grow in revenue and free cash flow.
Although the shares are down 40% year to date, they are trading at one of the lowest price-to-sales ratios of just 11.1, offering a great deal for investors who have the patience and perseverance to wait for the market to recognize the quality of the business.
2. Salesforce
Salesforce (NYSE:CRM) uses artificial intelligence (AI) to deliver customer relationship management (CRM) analytics, tools, and insights on the platform. The company’s stock price has remained nearly flat to date even as its business continues to grow.
Total revenue increased from $26.5 billion in fiscal 2022 to $34.9 billion in fiscal 2024. Operating income increased nearly tenfold from $548 million to $5 billion during the same period, while net income nearly tripled from $1.4 billion to $ 4.1 billion, and free cash flow increased from $5.3 billion to $9.5 billion.
The company continued its earnings momentum in the first half of the current fiscal year. Revenue increased 9.5% year over year to $18.5 billion, while operating income increased 85% to $3.5 billion. Net income doubled annually to $3 billion. Free cash flow of $6.8 billion was up 40% year over year.
Salesforce Corporation paid a dividend of $0.40 per share last year and an annual dividend yield of $1.60. Management projects that the total addressable market will grow by 13% annually from 2022 to 2026, up to $290 billion, providing ample opportunity to expand market share.
Earlier this month, the company acquired Own Company, a provider of data protection and management solutions, for about $1.9 billion. This purchase aims to improve the security and availability of customer data.
Salesforce also unveiled Agentforce, a suite of autonomous AI agents intended to help employees handle mundane tasks in service, sales, marketing, and commerce. The goal is to help customers increase efficiency with AI agents that analyze data, make decisions, and optimize marketing campaigns. This software upgrade should increase customer loyalty and ensure that Salesforce can continue to grow customer numbers and spend.
3. UiPath
UiPath (NYSE: PATH) not a typical AI company, but still helping many organizations to work together. The platform provides robotic process automation (RPA) to automate repetitive employee tasks.
The stock took a nosedive this year after CEO Rob Enslin abruptly resigned and Daniel Dines was reinstated as CEO. Due to this company shake-up, RPA company stock has dropped almost 50% year to date.
However, the business continues to grow. From fiscal 2022 to fiscal 2024, revenue increased from $892.3 million to $1.3 billion while gross profit increased from $723.4 million to $1.1 billion. The first two of the three fiscal years had negative free cash flow, but in fiscal 2024, free cash flow turned positive at $291.7 million.
In the first half of fiscal 2025, revenue and free cash flow continue to rise. Revenue grew nearly 13% year over year to $651.4 million with gross profit of $532.8 million, up 10% year over year. Free cash flow increased 32% year over year to $143.8 million. The company recently unveiled a new platform feature that incorporates generative AI. UiPath Autopilot is intended to assist software developers in making testing of their software easier and faster. This improvement, along with many other features integrated into the company’s platform, should increase customer loyalty while attracting new clients. As evidence, customers with more than $ 100,000 in annual recurring revenue jumped from 1,930 to 2,163 for the last quarter.
During UiPath’s 2022 Investor Day, management projected a total market of $93.2 billion. Investors should be convinced of the potential of the business and the possibility of better days ahead.
Should you invest $1,000 in Salesforce right now?
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Royston Yang has a position in Alphabet. The Motley Fool has positions and recommends Alphabet, Salesforce, Snowflake, and UiPath. The Motley Fool has a disclosure policy.
3 Growth Stocks That Could Accelerate in 2024 and Beyond published by The Motley Fool
