What does it mean when companies prioritize sales growth over profitability?

This strategy means companies choose to heavily reinvest their revenue into expansion rather than showing immediate profits. They spend aggressively on customer acquisition, market penetration, and scaling operations. The goal is to capture significant market share quickly, believing that once they achieve scale and market dominance, profitability will follow. Think of Amazon during its early years – they operated at a loss for years while building the infrastructure that eventually made them incredibly profitable.

Are high-growth stocks with negative profits too risky for beginner investors?

These stocks typically come with higher volatility and uncertainty, which can mean more risk. However, they don't have to be off-limits for beginners. The key is proper portfolio diversification – only allocate a portion of your investments to high-growth stocks, balancing them with more stable investments. Also, consider your time horizon: if you're investing for the long-term and can ride out short-term volatility, growth stocks may align well with your goals. Just be sure you understand the company's path to eventual profitability.

What are projected sales and why are they important?

Projected sales represent analysts' forecasts of a company's expected future revenue. For high-growth companies, this metric is particularly important because it indicates the company's anticipated expansion pace. Strong projected sales growth suggests the company is successfully executing its market capture strategy. Investors often value these companies based on sales multiples (like price-to-sales ratio) rather than profit-based metrics, making future sales projections a critical indicator of potential stock performance.

What is digital transformation and why does it benefit these companies?

Digital transformation refers to the integration of digital technology into all areas of a business, fundamentally changing how companies operate and deliver value to customers. This global trend is creating massive demand for the tools, platforms, and services that enable businesses to modernize their operations. The companies in this collection often provide these essential digital solutions – from cloud software to e-commerce platforms to marketing automation. As more businesses worldwide accelerate their digital initiatives, these companies benefit from expanding markets and increasing customer adoption.

How do I evaluate a company that isn't profitable yet?

When traditional profit metrics aren't available, look at alternative indicators: revenue growth rate (is it accelerating?), gross margin (is it improving?), customer acquisition costs relative to customer lifetime value, and cash burn rate compared to available cash. Also examine the total addressable market (TAM) to understand growth potential, and assess the company's competitive advantages that could lead to future profitability. Finally, listen to management's explanations of their path to profitability and timeline – a clear, reasonable plan is essential.

15 handpicked stocks

Sales Superstars

These companies are all-in on explosive revenue growth rather than immediate profits. Carefully selected by our analysts, this collection features businesses strategically positioned to dominate their markets through aggressive expansion and customer acquisition.

Han Tan | Market Analyst

Updated 2 days ago | Published at juin 17