Growth stocks can give you the best bang for your buck when it comes to growing your wealth to better prepare for retirement. Such companies can steadily grow their earnings and cash flows, garnering them higher share prices over time. This means that the value of your investment portfolio will also climb up in tandem.
The key is to hold such stocks for the long term as time works its magic on high-quality businesses. Selling them in a rush just to lock in short-term profits would unnecessarily disrupt this process of wealth-building.
There are certain attributes that are particularly worth looking for when you're trying to select a stock you'll feel good about keeping in your portfolio for many years. The business should boast a strong competitive edge that will help it fend off competition, have a long track record of growing its revenue and net income, and generate copious amounts of free cash flow so it won't have to rely on the kindness of banks or the bond market.
These ingredients won't just provide you with greater peace of mind along your investing journey, they're also crucial in helping you to compound your wealth. The three attractive growth stocks possess those attributes. You might wish to add any or all of them to your portfolio to hold for the long term.
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Intercontinental Exchange
Intercontinental Exchange (ICE -0.46%) is a provider of data services and technology solutions for mortgages, equities, futures, and fixed-income securities. The company serves a wide range of customers such as financial institutions, corporations, and government bodies.
The Atlanta-based company has made steady strides in growing its revenue and profits. Its revenue increased from $7.1 billion in 2021 to $8 billion in 2023 while operating income improved from $3.4 billion to $3.7 billion over the same period. Net income (after adjusting for exceptional items) jumped from $1.6 billion to $2.5 billion. Intercontinental Exchange's free cash flow also increased from $2.7 billion in 2021 to $3.1 billion in 2023.
The business saw continued growth in the first nine months of this year. Revenue climbed 20.2% year over year to $7 billion while operating income rose 16.7% to $3.2 billion. Net income, however, edged up just 3.1% because of higher tax expenses. Even so, free-cash-flow generation stayed strong, coming in at $2.6 billion versus $2.2 billion in the prior-year period, up nearly 17%. Those results allowed management to increase the company's quarterly dividend by 7% to $0.45 per share.
Intercontinental Exchange sees many tailwinds that could help it to grow its business further. The increasing globalization of the natural gas market and the shift toward clean energy have helped push its energy division's revenue up at an annualized rate of 9% since 2018. The increased demand for data analytics should act as a further catalyst. Its fixed income unit is seeing an increase in automation in line with the burgeoning growth in passive investing, which is creating a sustained demand for desktops, feeds, and derivative analytics solutions. For the mortgage unit, the conversion from analog to digital provides a great opportunity for the company to capture more business.
Intercontinental Exchange is also growing through acquisitions. It completed its purchase of Black Knight, a software, data, and analytics company, back in September 2023. The company also bought Ellie Mae in 2020 and Simplifile in 2019 to help increase its capabilities and offer a wider breadth of services. These moves, along with the tailwinds mentioned above, should help Intercontinental Exchange post healthy growth for many more years.
Upwork
Upwork (UPWK -0.35%) operates a platform that matches freelancers to organizations that require their skills and talent. The San Francisco-based company is present in 180 countries, boasted around 855,000 clients on its network as of Sept. 30, and offers more than 125 categories of work. U
The company's financial results improved from 2021 to 2023 as the business experienced a surge. Revenue increased from $367.3 million in 2021 to $518.7 million in 2023, and the business shifted from a net loss of $56.2 million to a net profit of $46.9 million over the same period. Its free cash flow more than doubled from $4.7 million in 2021 to $13.9 million in 2023.
In the first three quarters of 2024, Upwork's revenue increased by 14.4% year over year to $577.8 million while operating income stood at $51.6 million. Net income more than doubled year over year to $68.4 million. The company also churned out $134.5 million in free cash flow, a nearly sixfold year-over-year increase.
There could be more growth to come for the freelancer platform. Upwork is utilizing its artificial intelligence (AI) software, Uma, to push out new features and products for both freelancers and businesses. Uma can help freelancers create personalized proposal drafts to increase their chances of being selected for a gig. The AI agent also helps businesses identify the most suitable talent for their project needs.
These upgrades should encourage more businesses and freelancers to join Upwork's platform, driving a virtuous cycle that can help it attract even more talent. Upwork also recently announced its plan to acquire Objective, a search-as-a-service business that leverages AI. The integration of Objective will help to improve Upwork's search, match, and recommendations performance. The acquisition, which should close by the end of this year, will also enhance Uma's capabilities for images, video, and audio content.
Comfort Systems
Comfort Systems USA (FIX -1.55%) provides mechanical, electrical, and plumbing systems for buildings. With more than 170 locations and more than 18,000 staff, it has demonstrated steady, profitable growth over the years and has a quarter-of-a-century track record of generating positive free cash flow.
The Houston-based company grew its revenue from $3.1 billion to $5.2 billion from 2021 to 2023 with net income leaping from $143.3 million to $323.4 million over the same period. And the engineering company's free cash flow more than tripled from $157.8 million in 2021 to $544.7 million in 2023.
The company continued to post robust results through the first nine months of this year. Revenue increased by 34% year over year to $5.2 billion while operating income shot up 75% to $523 million. Net income was 62.4% higher at $376.6 million. Free cash flow rose by a healthy 43.1% to $568.2 million. And management raised the quarterly dividend from $0.30 to $0.35, making 2024 its 12th consecutive year of hikes.
The business should see more growth ahead as its backlog hit $5.7 billion, up an impressive 32.4% year over year. The company also maintains a clean balance sheet with no debt, but it has an $850 million senior credit facility on standby should it need it.
Apart from organic growth, Comfort Systems is also growing through acquisitions. Earlier this year, it bought Summit Industrial Construction, a specialty industrial mechanical contractor serving the technology, power, and industrial sectors. Summit will contribute to Comfort Systems' top line and should be neutral to slightly positive for earnings per share for 2024 and 2025.
