Investors have long been discussing a question: whether to choose growth stocks or value stocks.

Generally speaking, the advantage of growth stocks lies in their greater growth potential, while the disadvantage may be that stable profits lead to higher risks; the advantage of value stocks is their stable earnings and lower risks, but the disadvantage is limited growth potential.

People generally believe that rapidly growing companies inevitably need to burn a lot of cash to expand market share, and only when the company's scale reaches a certain level can profitability begin to be considered.

However, in reality, there are some companies that can maintain their profitability while growing rapidly, although such companies are not common.

The Motley Fool introduces four technology companies with a revenue growth rate of over 30% that achieve net income, namely CrowdStrike, Duolingo, Shift4 Payments, and AppLovin.

What is special about these four companies? This article will provide a good introduction to these four companies.

The leader in the field of cybersecurity: CrowdStrike (CRWD)

CrowdStrike is a rising star in the field of cybersecurity, established in 2011, and is now one of the industry leaders, second only to Palo Alto Networks, which shows how fast the company has developed.

CrowdStrike is a representative in the field of cybersecurity endpoint defense, with a pure business model that does not include firewall services or hardware sales. It is a software company providing endpoint defense as a SaaS.

The most famous product under CrowdStrike is its security threat intelligence platform, Falcon. Compared to traditional antivirus software, this platform features a lightweight design and proactive defense.

In Q4 of the fiscal year 2024, CrowdStrike reported revenue of $0.845 billion, a year-on-year growth of 32.63%. The net income was $54.941 million, a year-on-year increase of 212.28%, with a net profit margin of 6.5%.

In terms of revenue, while CrowdStrike's quarterly revenue growth remains above 30%, there is a declining trend. This is relatively normal, as growth cannot sustain the same high pace as that of a startup due to the increasing revenue scale.

Regarding profitability, CrowdStrike turned a profit starting from Q1 of the fiscal year 2024 and has achieved profitable results for four consecutive quarters, earning more over time.

Language learning platform: Duolingo

Duolingo (DUOL) is a language learning platform, regarded as the 'New Oriental' of the United States. The company was founded in 2011 and was listed on the Nasdaq in 2021.

On the mobile screen, the Duolingo app features a big-eyed owl; clicking on this avatar invites users to learn languages from over 40 countries.

The charm of this language learning app lies in its ability to avoid making learning feel tedious; instead, millions of users have come to see this addictive application as part of their daily lives. By the end of 2023, Duolingo's daily active users reached 26.9 million, a year-on-year growth of 65%.

Duolingo's business model is to provide free language courses while generating income through advertising and premium subscriptions. The Q4 2023 Earnings Report showed that Duolingo's revenue reached $0.151 billion, a year-on-year increase of 45%; net income was $12.117 million, a year-on-year increase of 187%, with a net profit margin of 8%, slightly higher than CrowdStrike.

Like CrowdStrike, Duolingo has only recently turned a profit. In Q2 2023, Duolingo achieved its first profit since going public and has reported profitability for three consecutive quarters.

The key to the company's profitability is that an increasing number of users are willing to pay for the platform. By Q4 2023, Duolingo had 6.6 million subscription-paying users, with the paid penetration rate rising from 7.8% the previous year to 8.3%.

As the company continues to expand, profit margins are expected to improve further. Duolingo anticipates continued growth over the next year, with management predicting that total revenue for 2024 will reach nearly $0.718 billion, expecting at least 35% year-on-year growth.

Thanks to the rapid growth of its revenue and profits, Duolingo's stock price has increased by 64% over the past year.

*The change in stock price over the past year is calculated based on closing prices from March 30, 2023, to March 27, 2024.

Payment technology company: Shift4 Payments (FOUR).

Shift4 Payments is an established payment technology company founded in 1999. However, the company did not go public on the NYSE until 2020.

Unlike other payment companies, Shift4 focuses on serving the restaurant and hospitality industry, and is entering the more upscale sports event industry.

The company's client base includes many well-known casual dining chain brands, luxury hotel chains, large entertainment venues, and venues and ticketing companies related to sports events. Although there are many other retail clients in different verticals, the aforementioned client groups form the foundation of Shift4, with over 0.2 million clients.

Therefore, from a business perspective, Shift4 is more like a travel concept stock, as its performance is related to people's travel habits; for example, during the pandemic, the company's performance may have been more affected.

The earnings report for Q4 2023 shows that Shift4's revenue is $0.705 billion, a year-on-year increase of 31.19%, but net income is $19.2 million, a 50% decrease compared to the previous year, with a net profit margin of 2.7%, lower than CrowdStrike and Duolingo.

However, it is worth noting that Shift4's stock performance over the past year has not been good, with a 10% decline. Reports indicate that Shift4 is considering selling the company but has not yet received a desirable quote, so investors need to pay attention to potential risks.

*The rise and fall of stock prices over the past year is calculated based on closing prices from March 30, 2023, to March 27, 2024.

Gaming advertising platform: AppLovin (APP)

AppLovin is a gaming advertising platform founded in 2011 and went public on the Nasdaq in 2021.

Initially, the company was an advertising platform that helped mobile game developers with user acquisition and traffic monetization, and later the company began developing its own games. In other words, AppLovin spans two aspects of the mobile gaming ecosystem, being both an advertising platform and a game developer.

Therefore, AppLovin's business is divided into two parts: game revenue (App revenue) and advertising platform revenue (Software platform revenue).

The Q4 2023 Earnings Report shows that AppLovin's revenue reached 0.953 billion USD, a year-on-year increase of 35.73%, with net income of 0.172 billion USD, a year-on-year increase of 316.61%, achieving a net profit margin of 18%. It has the strongest profitability among the four companies.

AppLovin can be considered a stock that has reversed its fortunes in adversity. In 2022, due to slowing revenue growth and increasing losses, its stock price had fallen significantly.

However, in 2023, the management identified the right direction, using AI to empower its advertising platform. This not only accelerated the growth of the advertising platform business but also improved profitability.

Compared to the other three stocks, AppLovin had the best stock return over the past year, with its stock rising by 359%.

The company forecasts that Q1 2024 revenue will reach between 0.955 and 0.975 billion USD, indicating a year-on-year growth of 33.57%-36.36%.

*The stock price fluctuation in the past year is calculated based on the closing prices from March 30, 2023, to March 27, 2024.

Potential Risks:

Although these four technology companies are experiencing rapid growth and have already achieved profitability, investors also need to be aware of potential risks.

1. Slowing Growth: The performance growth of these companies may face the risk of deceleration, especially if the market becomes saturated or competition intensifies, future growth may be affected.

2. Overly High Expectations: The market may have overly high expectations for the future performance of these companies. If the companies fail to meet the expected growth targets, it could lead to investor disappointment and a decline in stock prices.

Risk Disclosure: This content does not constitute a research report, is for reference only, and should not be used as the basis for any investment decision. The information contained herein is not a comprehensive description of the securities, markets, or developments mentioned. Although the sources of information are considered reliable, the accuracy or completeness of the above content is not guaranteed. Furthermore, there is no guarantee regarding the accuracy of any statements, viewpoints, or forecasts provided in this article.