The key to long-term success for growth stocks is sustainable revenue and profit growth. Cloud-based software companies Atlassian and Paycom Software have figured out the secret to solid growth by intensely focusing on efficiently winning customers. Atlassian, for instance, has kept sales and marketing spending to a minimum while pouring resources into research and development to improve its products and to develop new ones. Its impressive growth despite lean sales teams and potential to become a highly profitable software company make it a great option for investors with a long time horizon. Paycom Software, on the other hand, treats sales like a core competency and takes time and energy to build highly effective sales teams. Its sky-high customer satisfaction and low customer acquisition costs are due to 55 local sales teams located in cities across 28 states, with each sales team taking around 24 months to reach maturity.
The stickiness and mission-critical nature of Paycom’s products lead to impressive profitability, with the company reporting GAAP net income of $281 million on $1.375 billion of revenue last year. Its potential to cross-sell additional products and target larger businesses make it a steady, measured, and profitable growth company.
