Growth stocks paired with profits are some of the best-performing stocks on the market right now. These stocks have been the biggest gainers in the past few years and will likely keep delivering market-beating returns as long as they keep growing and delivering profits. Wall Street does not like companies with high amounts of cash burn, especially if they have no cash buffer, no matter how much growth they have.
As such, building your holdings around profitable growth businesses can help you realize market-beating returns over the long run. So let’s explore seven such profitable growth stocks.
Heico (HEI)
Heico (NYSE:HEI) makes aerospace and electronic products. The company delivered exceptional results in Q2 of 2024, with net sales up 39% year-over-year (YOY) to $955.4 million. This growth was driven by a remarkable 65% increase in the Flight Support Group segment, which benefited from the post-pandemic aviation boom and favorable tax policies that have spurred jet purchases.
Further, HEICO appears well-positioned to capitalize on the robust demand for commercial and defense aviation. The company’s profitability is rock-solid, with net income rising 17% to $123.1 million. Heico has an EBITDA margin of 26.4%. Sales should also keep growing fast due to the ballooning backlog.
With shares up 35% over the past year, global defense spending ramping up, and air travel recovering, HEI can soar to new heights.
Axon Enterprise (AXON)
Axon Enterprise (NASDAQ:AXON) supplies law enforcement agencies with critical equipment like body cameras, tasers and cloud software. The company is riding a wave of healthy demand as police spending ramps up to combat rising social unrest. Revenue for Q1 surged 34% YOY to $460 million, beating estimates by a solid $19 million.
The planned acquisition of Dedrone should significantly expand Axon’s addressable market in the red-hot aerospace security space. Their new AI-powered “Draft One” tool, which automatically generates police reports, could be a game-changer in freeing up officers to spend more time in their communities. The sales growth so far screams bullish.
With analysts projecting sales growth of 26% this year and EPS jumping from $4.4 to $6.6 over the next two years, Axon looks well-positioned for continued outperformance.
Kaspi.kz (KSPI)
Kaspi.kz (NASDAQ:KSPI) operates Kazakhstan’s largest payments, marketplace and fintech ecosystem. This underrated company is poised for significant long-term growth.
In Q1 of 2024, KSPI delivered impressive results across all key segments. Total Payment Volume surged 35% YOY, driving a 25% increase in both revenue and net income for the Payments division. Meanwhile, the Marketplace platform saw GMV skyrocket 62%, with revenue more than doubling and net income jumping 36%. Even the mature Fintech segment posted significant growth, as Total Finance Volume climbed 48%. The company’s margins are among the fattest I’ve seen in online retail.
Moreover, Kazakhstan is an increasingly attractive investment destination, particularly after the war. The influx of Russian migrants and the country’s emergence as a key re-export hub for Western goods into Russia are powerful tailwinds. With 71 monthly transactions per user and 40% total revenue growth, Kaspi.kz is capitalizing on this momentum.
Analysts project around 22% annual EPS growth in the coming years, and the stock offers a juicy 5.74% dividend yield.
Mastercard (MA)
Mastercard’s (NYSE:MA) needs no introduction. While it may not be the fastest-growing company, you simply can’t ignore the incredible profit margins. In Q1, Mastercard delivered strong results, with revenue up 11% and adjusted net income surging 16% YOY. Also, cross-border volume growth of 18% was impressive.
In addition, management reiterated their full-year outlook, which is encouraging given the mixed macroeconomic picture. I’m confident Mastercard will keep steadily growing alongside the broader economy. The company’s entrenched market position and continued expansion into new payment flows provide a very wide moat.
Analysts estimate low double-digit revenue growth and 16% annual EPS growth ahead. Those are very attractive numbers for such a mature business. With its 47.4% net margin and consistent execution, Mastercard is a core holding for any portfolio. Shareholders should enjoy robust returns as long as Wall Street holds the premium here. I believe Mastercard’s growth and profitability make it a slam-dunk investment for the long haul.
Roper Technologies (ROP)
Roper Technologies (NASDAQ:ROP) provides software and engineered solutions to various end markets. With its diversified portfolio, the company is benefiting from tailwinds across multiple sectors, driving impressive Q1 results with 14% revenue growth and 8% organic growth.
I believe Roper’s mature yet steadily growing business model positions it well to capitalize on the increasing demand for software solutions, especially as AI adoption accelerates productivity gains industrywide. Profitability is very strong here. EBITDA margins expanded 60 basis points to 40.2%, and adjusted EPS grew 13% to $4.41.
Also, management raised full-year guidance for revenue, organic growth and EPS. This should boost Roper’s positive momentum further. With analysts projecting EPS to surge from $18 in 2024 to $67 by 2033, I see a compelling long-term growth trajectory for this A-rated stock.
KKR & Co (KKR)
KKR & Co (NYSE:KKR) is a leading global investment firm that manages multiple alternative asset classes. I’m very bullish on KKR stock after the company reported strong Q1 of 2024 results, with fee-related EPS surging 22% to 75 cents. Management fees climbed 4% sequentially to $815 million, while the fee-related compensation ratio held steady at 17.5%, which was right in line with the target.
What excites me the most is KKR’s thriving insurance business, particularly its growing presence in Japan. The company is building a 21st-century Berkshire Hathaway (NYSE:BRK-A, NYSE:BRK-B) as its investments across asset classes pay off handsomely. With KKR guiding for adjusted EPS to double to $7-8 by 2026 and potentially hit $15 within a decade, this is a compounder trading at just 21 times forward earnings.
Yes, the valuation of 12.6 times forward sales might seem steep at first glance. However, I firmly believe this premium is justified. The profits matter the most here, and you’re not paying that high of an earnings multiple. As KKR’s AUM and investment returns march higher, shareholders should be rewarded with bountiful dividend hikes. GuruFocus’ DCF model shows huge growth ahead.
Zscaler (ZS)
Zscaler (NASDAQ:ZS) provides cloud-based cybersecurity solutions. While the company’s margins are currently thin, I believe the stock is bottoming out and poised for much higher valuations ahead.
In Q3 of 2024, Zscaler beat expectations, with revenue growing 32% to $553.2 million and EPS of 88 cents, surpassing estimates by 23 cents. Also, management raised full-year guidance, reflecting strong ongoing demand for its Zero Trust Exchange platform. This purpose-built solution securely connects users, workloads and devices, processing over 400 billion daily transactions while thwarting billions of threats.
I’m particularly bullish on Zscaler’s expanding product portfolio, which now includes AI-powered cybersecurity. As hackers increasingly weaponize artificial intelligence (AI), it only makes sense to use AI to fight back. Margins should expand rapidly as earnings grow.
ZS stock has declined 28% from February highs. In my opinion, this presents an attractive entry point. With EPS projected to skyrocket from $3 to $26 between 2024-2033 and revenue expected to surge 6x, Zscaler is a compelling long-term growth story trading at a discount. The future of cybersecurity is in the cloud.
On the date of publication, Omor Ibne Ehsan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
