Growth investing is an effective way to help to grow your wealth.
By parking money in well-run companies that are increasing their revenue and profits, you enjoy capital appreciation over time as their share prices head higher.
Fortunately, investors have a wealth of choices when it comes to selecting growth stocks.
For one, the software-as-a-service (SaaS) sector offers promising investment candidates.
These businesses operate a cloud platform where customers can use their software while charging a recurring subscription fee.
This business model is effective in generating strong loyalty while affording good visibility into future revenue.
Here are four US SaaS companies that are growing at impressive rates.
Salesforce (NYSE: CRM)
Salesforce operates a customer relationship management (CRM) cloud platform to help its clients connect with and gain insights into their customers.
The CRM specialist posted healthy growth for its fiscal 2023 (FY2023) ending 31 January 2023.
Revenue jumped 18.3% year on year to US$31.4 billion while remaining performance obligations (RPO) increased by 12% year on year to US$24.6 billion.
The company also announced the increase of its share repurchase program to US$20 billion.
Salesforce has continued this momentum by posting an 11.4% year-on-year increase in revenue to US$ 16.9 billion for its fiscal 2024’s first half (1H FY2024).
The business also generated positive free cash flow of US$4.9 billion for the period, up 34.4% year on year from US$3.6 billion.
RPO again climbed 12% year on year to US$24.1 billion for 1H FY2024.
Last month, Salesforce announced the integration of its new Einstein 1 Data Cloud to provide clients with generative artificial intelligence (AI) capabilities.
Clients can now connect any of their data to build AI-powered apps to deliver new and improved CRM experiences.
Veeva Systems (NYSE: VEEV)
Veeva is a leader in providing cloud software for the life sciences industry.
The company serves more than 1,000 customers ranging from the world’s largest pharmaceutical companies to emerging biotechnology businesses.
For its FY2023 ending 31 January 2023, Veeva saw revenue increase 16.4% year on year to US$2.2 billion.
Net profit improved by 14.1% year on year to US$487.7 million.
The cloud company also generated positive free cash flow of US$767 million, 2% higher than the US$750.2 million churned out a year ago.
For 1H FY2024, Veeva has demonstrated not just growth but good operating leverage.
Net profit climbed 27.5% year-on-year to US$243.1 million on the back of a 7.4% year-on-year rise in revenue to US$1.1 billion.
Free cash flow leapt 33% year on year to US$758.4 million.
The company is holding its Virtual Investor Day on 9 November where it will detail more of its growth plans and strategies.
Its new Vault CRM, a migration from its old Veeva Vault Platform, has scored its first customer win and is slated for general availability from April 2024 onwards.
Atlassian (NASDAQ: TEAM)
Atlassian’s cloud software helps organisation’s teams to collaborate, manage workflows, schedule tasks, and become more productive and efficient.
The company posted solid top-line growth for its FY2023 ending 30 June 2023.
Total revenue jumped 26.1% year on year to US$3.5 billion.
The business generated a positive free cash flow of US$842.2 million, 12.8% higher than the prior year’s US$746.4 million.
Atlassian’s customer count has been steadily rising too.
The company ended FY2023 with 262,337 customers, up 8.1% from FY2022’s 242,623.
Importantly, customers that spend more than S$1 million surged by 52% year on year to 353, demonstrating higher spending from existing customers over time.
Atlassian will press on with its strategy of investing in its software for FY2024 and is seeing good momentum in three key areas cloud, enterprise, and ITSM (IT Service Management).
Fastly (NYSE: FSLY)
Fastly operates an edge cloud platform that helps customers make sense of complex data to enable better digital experiences.
The company posted a 22.1% year-on-year growth in revenue for 2022 to US$432.7 million.
For the first half of 2023 (1H 2023), growth has continued with a 17.3% year-on-year increase in revenue to US$240.4 million.
The business has expanded its market reach with new packaging and pricing for its core services.
Fastly’s dollar-based net expansion rate, a measure of how much more existing customers are spending, increased to 123% for its latest second quarter 2023.
Customer count, however, dipped slightly by 28 to end 1H 2023 at 3,072.
The average enterprise customer spend has risen by 3% quarter on quarter to US$818,000.
Fastly continues to enhance its product features and released Dynamic Backends to enable customers to create new backend server definitions easily.
It has also introduced Core Cache API to enable developers to have access to Fastly’s cache network.
The future of Artificial Intelligence (AI) is upon us, and it has never been more important to understand its progress. We’ve just released an urgent Special Free Report that explores all the opportunities and dangers of AI. Discover the steps you must take to prepare your portfolio for the inevitable AI boom. Click here to download the complimentary report now.
Follow us on Facebook and Telegram for the latest investing news and analyses!
Disclosure: Royston Yang does not own shares in any of the companies mentioned.