Growth stocks have been on a tear this year as the major U.S. indexes have hit new all-time highs. But don't be put off by the fact that the market has already booked such impressive gains -- there could be a lot more room for stocks to head higher if earnings growth continues. That's a good reason for you to continue researching stocks that could potentially be added to your investment portfolio.
However, for thoughtful investors, not every company will qualify for inclusion. The essential characteristics you should be looking for include a robust business model, a dominant market share, a track record of revenue and earnings growth, consistent free cash flow generation, and a growing total addressable market. When all these stars align, you can be confident that the stock should do well over the long term.
With the above attributes in mind, here are three stocks that could shoot skyward in 2025 and beyond.
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1. Autodesk
Autodesk (ADSK -0.90%) develops design software used by architects, engineers, and designers, and also maintains a platform that helps to mine data for insights and automate processes.
The company has demonstrated steady growth, with revenue rising from $4.4 billion in fiscal 2022 to $5.5 billion in fiscal 2024 (which ended Jan. 31). Its net income nearly doubled from $497 million to $906 million over that period. The business also generated consistent free cash flow at an average of $1.6 billion per year.
The company continued to report strong financial numbers in the first half of its fiscal 2025. Revenue rose 11.8% year over year to $2.9 billion while operating income climbed 34% to $642 million. It generated free cash flow of $651 million for the half year, putting it on track to churn out more than $1 billion in free cash flow for fiscal 2025. Total billings also increased by 13% to $1.2 billion, indicating continued top-line growth.
Management has identified numerous opportunities for long-term growth and laid out its strategies based on three key pillars. The first of those is the renewal and expansion of its core design business in which it will grow its renewal base and start to monetize non-paying users. Prices will also be adjusted upwards for inflation and by curating the product mix.
Autodesk is also looking to expand its software offerings into adjacent sectors such as water and construction. Finally, management intends to evolve the company's business model to provide consumption-based offerings. Based on these strategies, the company is targeting revenue growth of 10% to 15% per year.
2. The Trade Desk
The Trade Desk (TTD -1.68%) operates a cloud-based platform that helps buyers of digital advertising space to better identify and select their target audiences, while also helping create and manage ad campaigns. The company offers the largest connected TV inventory in the industry and has an edge over competitors in providing access to major networks and ad-supported streaming services.
The Trade Desk's top and bottom lines have grown impressively over the years. Revenue went from $1.2 billion in 2021 to $1.9 billion in 2023 as net income increased from $137.8 million to $179 million. Free cash flow also steadily increased from $318.5 million in 2021 to $543.3 million in 2023.
The Trade Desk continued to shine in the first half of 2024. Revenue rose 27% year over year to $1.1 billion with operating income soaring more than sixfold to $123.4 million. Net income came in at $116.7 million, more than doubling the $42.3 million it reported in the corresponding period of 2023. Free cash flow also stayed positive and stood at $233 million for the half year. The company's customer retention rates exceeded 95% -- a level it has remained above for the past decade.
As The Trade Desk noted in its Q2 earnings presentation, Magna Global estimates that total global ad spending this year will be around $900 billion. That gives the company a massive total addressable market to pursue, and plenty of room for further growth.
Management sees opportunities in the connected TV space, with 90 million households and 120 million devices within its reach. Using demand-side platform targeting will enable advertisers to zoom in on each relevant customer in real time.
The Trade Desk is also looking at growth outside the U.S., as around two-thirds of global advertising spend occurs outside of North America. Finally, the company sees potential in the retail space as marketers are looking for real-time retail data that can be utilized to plan their campaigns.
3. Blackline
Blackline (BL -2.06%) provides a cloud platform that helps businesses perform their financial closing and accounting work while providing analytics and consolidating repetitive tasks. The company makes use of artificial intelligence to provide organizations with end-to-end products for their accounting operations, enabling them to streamline and achieve better efficiency.
From 2021 to 2023, the company's revenue grew from $425.7 million to $590 million. Better yet, after booking losses in 2021 and 2022, in 2023, it reported net income of $52.8 million. Free cash flow also improved, jumping from $56.8 million in 2021 to $99 million in 2023.
Blackline turned in a strong performance for the first half of 2024 as the business continued to generate healthy profits. Revenue increased by 12.1% year over year to $318 million with operating income surging 51.7% to $4 million. Net income excluding exceptional items increased by close to 19% year over year to $22.4 million. Free cash flow more than doubled year over year to $78.1 million.
And Blackline's customer count increased at an annualized rate of 9% from 3,433 in 2020 to 4,398 in 2023, with a further increase to 4,435 as of the end of the first half of 2024.
Management believes there is room for further growth, as Blackline has the advantages of being the market leader and being able to deliver a unified financial operations management platform.
The company plans to utilize a "land and expand" strategy to encourage established customers to spend more. At the same time, Blackline will also target new business in the enterprise and mid-market segments.
By helping potential customers in their digital transformations and touting the value of its platform, Blackline should see success in growing both its top and bottom lines in the years ahead. The company sees a total addressable market worth $39 billion, with more than 200,000 potential customers. As such, the company has ample growth opportunities.
