Top 5 Growth Stocks That Can Beat the S&P 500

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Investors who aim to bet the broader indexes such as the S&P 500 need to create a portfolio of growth stocks. Generally, growth stocks have the ability to increase revenue and earnings at a faster pace allowing them to generate outsized returns over the long term. Here, we look at five such companies that can crush the S&P 500 over the upcoming decade.

2Okta

A company valued at a market cap of $36.36 billion, Okta is trying to revolutionize the enterprise-facing identity management platform business. Similar to The Trade Desk, Okta is also part of a rapidly expanding addressable market that is valued at $80 billion in 2021, up from just $18 billion in 2017.

In the first quarter of fiscal 2022 that ended in April, Okta increased sales by 37% year over year to $251 million. Comparatively, analysts forecast sales at $238.3 million. The company’s net retention rate stood at 120% which suggests existing customers spent an additional 20% on average for Okta’s suite of security solutions.

Another key driver of revenue growth was the expansion of its customer base that now stands at 10,650, up 27% year over year. In Q1, Okta reported a net loss of $0.10 per share which was wider than its prior-year loss of $0.06 per share. The company attributed its net loss expansion to the $6.5 billion acquisition of Auth0 which specializes in customer identity management.

Despite its widening losses, Okta’s free cash flow stood at $53 million, accounting for 21% of sales. Now, Okta has forecast sales to grow at an annual rate of 35% through 2026 to touch $4 billion in revenue, while maintaining a free cash flow margin of 20%.

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Aditya Raghunath has close to seven years of experience in covering publicly-listed companies. With a post-graduate degree in finance, Aditya aims to educate and engage investors by writing extensively about growth, dividend, and value stocks. If you are considering investing in the stock market, he recommends reading The Intelligent Investor by Benjamin Graham before taking the plunge.

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