In the ever-changing world of finance, investors seek various avenues for long-term profitability. A mix of growth and dividend stocks can offer the desired mix for many investors. Top growth stocks provide the sort of viable long-term cash flow potential investors want, while dividend-paying companies offer relative stability within a portfolio.
Now, with the S&P 500 officially in a bull market, all eyes are on growth stocks. Investors seeking exposure to high-growth names may be doing so when valuations are near all-time highs in certain sectors.
That’s not to say there isn’t good reason for this valuation level. Some companies, like a few of the stocks I’ve listed here, are expensive for a reason. However, investors should take a measured approach to these stocks and consider their fundamentals before diving in.
With that said, here are three of the top growth stocks I think investors should consider precisely for their fundamentals.
ASML Holdings (ASML)
ASML Holdings (NASDAQ:ASML), a lithography systems market champ, had a sluggish 2023 but came back in Q4, achieving nearly 13% year-over-year net sales growth. The company holds impressive metrics and a significant backlog of 39 billion euros.
ASML’s top position in EUV technology is critical for semiconductor advancement, especially in advanced memory solutions. CEO Peter Wennink maintained a humble outlook despite positive signs of a 2024 revenue similar to the previous year. The company sets eyes for significant growth in 2025.
AMSL Holdings shares skyrocketed nearly 10%, reaching a peak driven by substantial Q4 earnings and a robust order backlog, indicating a recovery in the computer chip market. The Dutch company’s market capitalization outdid €300 billion. Q4 net profits increased by 9% to €2 billion on sales of €7.2 billion, surpassing analyst forecasts.
CrowdStrike Holdings (CRWD)
CrowdStrike (NASDAQ:CRWD) has seen some rather incredible results of late. The company’s third-quarter earnings report showed a 96% increase in operating profitability, and an all-time best in terms of margins at 22% delivered. This significant improvement in fundamentals underscores CrowdStrike’s ability to grow at scale while maintaining its profitability.
CrowdStrike’s balanced long-term approach towards growth and profitability positions it for long-term success. This philosophy is further highlighted in the company’s new target models, driving year-over-year improvement in subscription gross margins from 82% to 85%, operating margins from 28% to 32%, and free cash flow margins from 34% to the new 38%. Investors gain confidence from these targets that the company will maintain growth.
In the the long-term, investors seeking exposure to the cybersecurity space will continue to favor fundamentally-strong companies capable of gaining market share profitably. Currently, CRWD appears to be a premier way to play this space, and has captured my attention as a top growth stock.
Snowflake (SNOW)
Amid market cyclicality, Snowflake (NASDAQ:SNOW) has been a relatively strong performer. Similar to many top growth stocks, SNOW stock has yet to reach its all-time highs from the previous bull market rally. However, on a one-year basis, Snowflake is among the top-performing cloud stocks in the market, and has captured my attention.
Much of this recent improvement is closely tied with Snowflake’s AI integrations. The narrative around artificial intelligence is expected to persist, providing benefits to companies that can leverage this technology to enhance their growth prospects. One such company, Snowflake, is positioned to benefit from this trend, combined with the already high interest around cloud computing technology.
I believe Snowflake is currently trading below its intrinsic value, with a decent margin of safety. This view is bolstered by analyst forecasts projecting 33% annual profit growth in the coming years. These factors, all things being equal, should contribute to increased cash flow and enhanced share value over time.
As a hyper-growth company succeeding in cloud data, Snowflake has captured the attention of Warren Buffett and his team as a key tech stock. Despite a lofty valuation multiple of 26 times sales, the company positions itself as a top growth stock. If Snowflake continues to generate market-beating growth over the next five years, the current valuation could prove to be justified.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
