The best way to grow your investment portfolio is to park your money in promising growth stocks.
The US market offers a plethora of choices when it comes to growth stocks.
You must carefully review these businesses to determine which has the right attributes for long-term capital appreciation.
Characteristics to look for include a strong, robust business model, a track record of growing revenue, profits, and free cash flow, and sustainable catalysts that can take the business to the next level.
With this list in mind, here are four promising US growth stocks that could make it to your buy watchlist.
Shopify (NYSE: SHOP)
Shopify offers a cloud platform with tools and help for budding entrepreneurs and homeowners to set up online businesses.
The company provides essential internet infrastructure to enable these businesses to get off the ground, market themselves, and scale their presence.
Shopify reported a robust set of earnings for 2024 with revenue jumping 25.8% year on year to US$8.9 billion.
Operating profit stood at US$1.1 billion, a reversal from the prior year’s adjusted operating loss (excluding exceptional items) of US$78 million.
Net profit stood at US$2 billion, up 37.2% year on year from 2023’s US$1.5 billion after excluding the impairment loss of US$1.5 billion from the sale of Shopify’s logistics business.
Shopify also did well on the cash flow side, generating a positive free cash flow of US$1.6 billion for 2024.
This was a 76.5% year-on-year surge from the US$905 million of free cash flow generated in 2023.
Gross merchandise value (GMV) climbed 24% year on year to US$292.3 billion while monthly recurring revenue increased by 23.6% year on year to US$178 million.
Management is optimistic about the outlook for the first quarter of 2025 (1Q 2025) and expects revenue to grow at a mid-20% rate on a year-on-year basis.
Free cash flow margin (i.e. free cash flow divided by revenue) should be in the mid-teens level.
DoorDash (NASDAQ: DASH)
DoorDash is the largest food delivery company in the US with a market share of nearly 67% as of March 2024.
The company also connects consumers with local businesses in more than 25 countries around the world.
DoorDash saw its revenue for 2024 increase 24.2% year on year to US$10.7 billion.
Operating loss improved significantly from US$579 million in 2023 to US$38 million in 2024.
The business reported a net profit of US$123 million for 2024, boosted by interest income, versus a net loss of US$558 million in the prior year.
Cash-flow-wise, DoorDash churned out US$1.8 billion of free cash flow, a 33.6% year-on-year increase over the previous year.
Total orders on the company’s platform rose 19% year on year to 685 million for the fourth quarter of 2024 (4Q 2024).
The marketplace gross order value (GOV) climbed 21% year on year to US$21.3 billion, showcasing solid growth for the business.
For 2025, the company will focus on incremental improvements to increase operating efficiency and also reinvest money to scale the business further.
There are also several new initiatives that DoorDash is working on that may develop into valuable services for consumers, merchants, and members.
Ralph Lauren (NYSE: RL)
Ralph Lauren is a global designer, marketer, and distributor of premium lifestyle products such as apparel, footwear, accessories, and fragrances.
The retailer reported a strong set of earnings for the first nine months of fiscal 2025 (9M FY2025) ending 28 December 2024.
Revenue inched up 6.3% year on year to US$5.4 billion while operating profit climbed nearly 20% year on year to US$777.1 million.
Net profit stood at US$613.9 million, 10.5% higher than a year ago.
Ralph Lauren also generated healthy positive free cash flow of US$976.6 million, 18.5% higher than the US$823.8 million churned out in 9M FY2024.
The company also declared a quarterly dividend of US$0.825, which was higher than the US$0.75 paid out in the previous fiscal year.
The premium apparel retailer made good progress on its Next Great Chapter: Accelerate initiatives to grow the business.
1.9 million new customers were acquired for its direct-to-consumer business division.
The business also saw a 12% year-on-year increase in average unit retail.
Ralph Lauren continued to expand its presence with the opening of 34 new owned or partnered stores in 3Q FY2025 in locations such as Beijing, Edinburgh, and London.
Cintas (NASDAQ: CTAS)
Cintas provides products and services to help organisations to keep their facilities and employees safe and clean.
The company sells a variety of items such as uniforms, mats, mops, and restroom supplies, among others.
For the first six months of fiscal 2025 (1H FY2025) ending 30 November 2024, Cintas reported a 7.3% year-on-year increase in revenue to US$5.1 billion.
Operating profit improved by 15.2% year on year to US$1.15 billion while net profit stood at US$900.5 million, up 18.5% year on year.
For 1H FY2025, Cintas generated a positive free cash flow of US$713.8 million, 35% higher than a year ago.
The company declared a quarterly dividend of US$0.39 per share, marking 41 consecutive years of dividend increases since Cintas’ IPO back in 1983.
Last month, Cintas offered to purchase all the shares of UniFirst Corporation (NYSE: UNF) for US$275 per share.
UniFirst is one of the largest providers of uniform rental and facility services in the US.
Management believes that both companies are a strategic fit and that this acquisition can greatly benefit the company’s customers and partners.
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Disclosure: Royston Yang does not own shares in any of the companies mentioned.
