Growth investing is all about finding opportunity. Specifically, it's about identifying companies that are growing thanks to a competitive advantage, an industry trend, or an innovative product.
Today, let's examine two exciting stocks that have demonstrated impressive sales growth and are expected to deliver more of it in the coming years: Arista Networks (ANET -4.94%) and Duolingo (DUOL -3.01%).
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Arista Networks
Up first is Arista Networks.
NYSE: ANET
Key Data Points
As of this writing, shares of Arista have advanced by more than 60% over the last 12 months as demand for the company's cloud networking solutions continued to show strength. Indeed, over the last five years, Arista's revenue has more than tripled, from $2.2 billion in 2020 to greater than $6.6 billion during the last 12 months. That works out to an average quarterly revenue growth of 25%.
What's more, given the growing appetite for cloud services and data center capacity -- thanks to the AI boom -- it appears likely that Arista's sales will advance further in the years to come. According to Yahoo Finance, consensus analyst estimates suggest that Arista will generate $8.3 billion of revenue in 2025, up about 19% year over year. Moreover, those same analysts expect the company to generate $2.47 in earnings per share, up roughly 13%.
Turning to its balance sheet, Arista sports ample cash, with over $7.4 billion in cash on hand and only $70 million in debt. In addition, the company has generated more than $3.2 billion in free cash flow over the last 12 months.
For investors seeking a stock with plenty of room to grow and rock-solid fundamentals, it might be time to consider Arista Networks.
Duolingo
Next, there's Duolingo.
NASDAQ: DUOL
Key Data Points
The company operates an online learning platform that teaches languages, music, and math to more than 37 million daily average users (DAUs).
For investors looking for growth, Duolingo has it in spades. Over the last three years, the company's quarter-over-quarter revenue growth has averaged 42%. That means over the same span of three years, the company's quarterly revenue has skyrocketed from $81 million to $193 million.
However, Duolingo's growth isn't just limited to its sales total; earnings have also soared. Indeed, three years ago, Duolingo was unprofitable; it reported a quarterly loss of more than $18 million in late 2022. In its most recent quarter (the three months ending on Sept. 30, 2024), the company generated more than $23 million in net income.
Behind these terrific fundamentals is a straightforward business model that continues to deliver excellent growth. The company generates about 82% of its revenue from subscriptions (the rest coming from advertising). While Duolingo's app is free to download, users are encouraged to upgrade to a subscription to keep their progress going.
The company has truly embraced the gamification model, which keeps users coming back for more learning thanks to fun reminders and social network effects, where friends share achievements, send each other boosters, and compete in weekly leagues for bragging rights.
In summary, investors shouldn't overlook Duolingo or its growth. Indeed, Duolingo stock could be a great fit for investors looking for a hypergrowth stock.
