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 grow their profits and cash flows steadily, earning higher stock prices over time. This means that the value of your investment portfolio also increases.
The key is to hold such stocks for the long term, as time works its magic on high-quality companies. If we were to sell them hastily, just to secure short-term profits, this process of wealth building would be unnecessarily disrupted.
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There are certain characteristics that are especially worth paying attention to when you’re trying to select a stock that you can confidently keep in your portfolio for years to come. The company must have a strong competitive advantage that will help it fend off competition, have a long track record of growing its sales and net income, and generate large amounts of free cash flow so that it does not have to depend of the friendliness of the banks. or the bond market.
Not only will these ingredients give you greater peace of mind during your investing journey, they are also crucial in helping you grow your wealth. The three attractive growth stocks possess these characteristics. You may want to add all or all of them to your portfolio to hold for the long term.
Intercontinental exchange (NYSE: IJS) is a provider of data services and technology solutions for mortgages, equities, futures and fixed income. The company serves a wide range of customers, such as financial institutions, corporations and government agencies.
The Atlanta-based company has made steady progress in growing its revenue and profits. 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 profit (after adjustment for exceptional items) increased 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 company experienced continued growth in the first nine months of this year. Revenue rose 20.2% year over year to $7 billion, while operating income rose 16.7% to $3.2 billion. However, the net result only increased by 3.1% due to higher tax expenses. Still, free cash flow remained strong at $2.6 billion versus $2.2 billion in the same period last year, an increase of almost 17%. These results allowed management to increase the company’s quarterly dividend by 7% to $0.45 per share.
Intercontinental Exchange sees a lot of tailwinds that could help the company continue to grow its business. The increasing globalization of the natural gas market and the shift to clean energy have helped the energy division grow its revenue by 9% year-on-year since 2018. The increased demand for data analytics should act as a further catalyst. The fixed income division is seeing an increase in automation in line with the burgeoning growth of passive investing, creating continued 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 generate more revenue.
Intercontinental Exchange also grows through acquisitions. It completed the purchase of Black Knight, a software, data and analytics company, in September 2023. The company also bought Ellie Mae in 2020 and Simplifile in 2019 to expand its capabilities and offer a broader range of services. These moves, along with the tailwinds mentioned above, should help Intercontinental Exchange achieve healthy growth for many years to come.
Workup (NASDAQ: UPWK) operates a platform that connects freelancers with organizations that need their skills and talent. The San Francisco-based company has a presence in 180 countries, had approximately 855,000 customers in its network as of September 30, and offers more than 125 work categories. YOU
The company’s financial results improved from 2021 to 2023 as the company experienced a surge. Revenue rose from $367.3 million in 2021 to $518.7 million in 2023, and the company shifted from a net loss of $56.2 million to a net profit of $46.9 million over the same period. Free cash flow has 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 rose 14.4% year-over-year to $577.8 million, while operating income was $51.6 million. Net income more than doubled year over year to $68.4 million. The company also generated $134.5 million in free cash flow, a nearly sixfold increase year over year.
More growth could be coming for the freelancer platform. Upwork is using its artificial intelligence (AI) software, Uma, to introduce new features and products for both freelancers and businesses. Uma can help freelancers create personalized proposal concepts to increase their chances of being selected for a gig. The AI agent also helps companies identify the most suitable talent for their project needs.
These upgrades should encourage more businesses and freelancers to join the Upwork platform, creating a virtuous cycle that could help the platform attract even more talent. Upwork also recently announced its plan to acquire Objective, a search-as-a-service company that leverages AI. Objective’s integration will help improve Upwork’s performance in search, matching, and recommendations. The acquisition, which should be completed by the end of this year, will also expand Uma’s capabilities in images, video and audio content.
Comfort systems VS (NYSE: FIX) supplies mechanical, electrical and plumbing systems for buildings. With more than 170 locations and more than 18,000 employees, it has demonstrated steady, profitable growth over the years and has a quarter-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 profit rising from $143.3 million to $323.4 million over the same period. And the engineering firm’s free cash flow more than tripled from $157.8 million in 2021 to $544.7 million in 2023.
The company continued to deliver robust results through the first nine months of this year. Revenue rose 34% year over year to $5.2 billion, while operating income rose 75% to $523 million. Net profit was 62.4% higher at $376.6 million. Free cash flow rose a healthy 43.1% to $568.2 million. And management increased the quarterly dividend from $0.30 to $0.35, making 2024 the twelfth consecutive year of increases.
The company should see more growth in the future as its backlog stands at $5.7 billion, an impressive 32.4% increase year-over-year. The company also has a clean balance sheet with no debt, but does have an $850 million senior credit facility if the need arises.
In addition to organic growth, Comfort Systems also grows through acquisitions. Earlier this year it purchased Summit Industrial Construction, a specialty industrial mechanical contractor serving the technology, energy and industrial sectors. Summit will be accretive to Comfort Systems’ revenue and should be neutral to slightly positive for earnings per share for 2024 and 2025.
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*Stock Advisor returns November 25, 2024
Royston Yang has no position in any of the stocks mentioned. The Motley Fool recommends Intercontinental Exchange and Upwork. The Motley Fool has a disclosure policy.
3 Brilliant Growth Stocks to Buy Now and Hold for the Long Term was originally published by The Motley Fool
