Investing in Up-and-Coming Stocks

Some of the best growth stocks aren't household names, at least not yet. These up-and-coming companies are still relatively early in their growth cycle. Because of that, investors can potentially earn enormous returns as they reach their full potential.  

Here's a closer look at some of the most intriguing up-and-coming growth stocks. While they're riskier than more mature companies, they offer some of the highest return potential for investors. 

Top up-and-coming stocks

One of the best long-term investment strategies for increasing wealth is investing in the stocks of companies rapidly expanding their businesses by tapping into new market opportunities such as solving major problems. Those who invest money in emerging companies often reap the highest rewards.

However, not every up-and-coming company is successful, making this a higher-risk strategy. Still, the reward can be well worth taking the chance of investing in an up-and-coming company since one big win can produce game-changing returns.

With that upside potential in mind, here's a list of 11 up-and-coming stock ideas investors might want to consider:

Data source: Company websites and YCharts. Market cap data as of April 13, 2022.

Here's a closer look at these up-and-coming companies:

1. Bill.com

Bill.com is a fintech company that helps small and medium-sized businesses optimize their payment systems. The company's software automates the receipt and payment of bills and invoices. It works seamlessly with most popular accounting programs and makes it easy for companies to approve payments.

The artificial intelligence (AI)-enabled, cloud-based company increased its revenue by 51% in fiscal 2021. It had more than 135,000 customers on its platform at the end of 2022, which was a jump of 24%. Those numbers should continue growing as Bill.com expands its existing platform and acquires new ones.

In 2021, the company acquired Divvy, a leader in spend management for small and medium businesses, and Invoice2go, a leading mobile-first accounts receivable provider, in order to continue expanding its reach. With more small and medium-sized businesses seeing savings from using Bill.com's platform, the company should continue growing at a fast pace.

2. Coinbase Global

Coinbase Global is the largest cryptocurrency exchange in the U.S. It allows users to buy and sell cryptocurrencies such as Bitcoin (CRYPTO:BTC) and Ether (CRYPTO:ETH). The platform completed its initial public offering (IPO) in 2021. 

Coinbase ended 2021 with an average of 11.4 million monthly transacting users, more than 300% above 2020's level. Trading volume hit more than $1.67 trillion, up from $193 billion in the prior year. That helped push its net revenue up to nearly $7.5 billion, a more than 500% increase from 2020's level. As more people start trading cryptocurrency and other digital assets, Coinbase will likely continue thriving.

3. CrowdStrike Holdings

CrowdStrike Holdings is a cloud-based cybersecurity platform. It relies on big data and AI to detect threats and stop breaches.

Cybersecurity is a rapidly expanding market considering that threats continue to grow. As a result, CrowdStrike increased its annual recurring revenue (ARR) by 65% in its 2022 fiscal year to $1.7 billion. The company sees ARR rising to $5 billion by its 2026 fiscal year, while its total addressable market opportunity should reach more than $125 billion.

4. Docebo

Docebo is a software-as-a-service (SaaS) company offering cloud-based educational and training resources to businesses. Its software includes the Learn learning management system. This solution allows businesses to train their workers and educate customers. 

The company ended 2021 with more than 2,800 customers, an increase of about 625 over the previous 12 months. That helped drive 66% year-over-year revenue growth for the software company. It's adding new customers to its platform all the time, which should continue driving robust revenue growth.

5. Fastly

Fastly operates a global content delivery network (CDN). It has an infrastructure-as-a-service business model, providing customers the infrastructure they need to quickly and reliably transmit data. It aims to make the internet faster by using solid-state caching systems. While more expensive than traditional magnetic disks, they're faster and more reliable and secure.

As more customers use its CDN, Fastly will make more money from its existing network. Revenue surged 22% year over year in 2021 as Fastly expanded its relationship with existing customers and added new ones to its network.

6. Lemonade

Lemonade is a tech-based insurance company. It uses an AI-powered platform to make it easier for customers to buy insurance and process claims. Customers can buy a new insurance policy in a matter of minutes. Meanwhile, Lemonade can process claims in a few seconds instead of the days it often takes traditional insurance companies to process and pay out claims. 

The company is growing briskly. Its customer count passed 1.4 million by the end of 2021, up 43% year over year. It's also collecting a higher premium per customer (up 25% year over year) as it expands its offerings to include renters', home, life, auto, and pet insurance. Lemonade agreed to acquire MetroMile in 2021, giving it the data, talent, and technology to accelerate the rollout of Lemonade Car. With the insurance industry ripe for disruption, Lemonade can squeeze out a lot of growth by grabbing more market share.

7. Opendoor Technologies

Opendoor is a real estate technology company primarily focused on iBuying. It allows people to purchase and sell homes directly on the platform instead of from each other. That makes the process smoother for all involved, taking away a lot of the stress from the buying and selling process.

About $1.6 trillion of homes change hands in the U.S. each year, representing a massive opportunity for Opendoor. The company purchased nearly 37,000 homes in 2021, up almost 500% year over year, selling nearly 22,000 of them by year-end for a profit. As it continues expanding its home purchases, Opendoor will showcase its platform's ease to more buyers and sellers, which could take iBuying mainstream.

8. Snowflake

Snowflake operates a cloud-based data warehouse platform. It offers companies solutions to store all the data they collect while also making it easily accessible. 

The company is growing briskly. Snowflake's annual revenue soared 102% in its fiscal year 2022, powered by new customers and expanding sales to existing ones. Snowflake sees a massive $90 billion future market opportunity for its cloud data platform, significantly more than the existing $14 billion annual data warehouse market. Its ability to capture this growing opportunity will help it to continue delivering strong financial results.

9. Teledoc Health

Teledoc is a videoconferencing platform that allows patients to access medical professionals. It's more convenient and less expensive than in-person visits to a doctor's office. The company is building an end-to-end virtual healthcare platform to make it even easier for people to access the medical care they need. 

Full year revenue surged 86% year over year to $2 billion while total visits increase 38% to 15.4 million. Although the stock was trading below its pre-COVID price as of early 2022 as more people virtually connect with medical professionals, Teledoc should be able to continue expanding its revenue at a rapid pace.

10. Upstart Holdings

Upstart provides an AI-driven tech platform that allows financial institutions to make smarter lending decisions. The company's platform takes more than 1,000 variables into account when evaluating a potential borrower, a much more robust system than traditional credit score-based approvals. That allows it to quickly approve more loans (71% receive instant approval) at lower rates than traditional underwriting programs.

Upstart is growing at an unbelievable rate. Its revenue skyrocketed 264% year over year in 2021. The company is just scratching the surface of its potential. Upstart started in the small personal loan market ($96 billion in opportunities) but has since expanded into the $727 billion auto loan market.

The fintech company has the potential to wade even deeper into the $4.6 trillion U.S. consumer credit market by expanding into mortgages. That gives it lots of room to continue increasing its consumer finance offerings while also bolstering its customer count. That should power continued robust growth for Upstart investors.

11. Zscaler

Zscaler is a cloud-based cybersecurity platform. Increasingly, employees and customers need to access information stored in offsite data centers instead of a central server. Further, they're often accessing it from remote locations instead of at the office. Zscaler helps them securely access this information remotely. 

The company's revenue has grown at a 52% compound annual rate in recent years. It achieved a milestone of $1 billion in ARR in its fiscal first quarter of 2021, and it set an ambitious goal to boost its ARR to $5 billion in the coming years. Zscaler aims to achieve that bold target by bringing new customers into its network and upselling existing ones. It can also expand into new regions and segments while also increasing its functionality and providing new platform solutions.

These up-and-coming stocks are worth a closer look

These tech-powered companies are all working to provide innovative solutions to some of the biggest problems facing other businesses and consumers. That positions these up-and-coming stocks for robust growth in the coming years. Because of that, investors should at least consider putting them on the watch list.