Growth stocks are attractive investments to put in your portfolio because their sales are rising, which often attracts a lot of bullishness. But it's all for naught if the company isn't making much money on those sales. A key metric investors should always consider is gross margin: how much of the company's revenue is left after it's covered overhead and operating expenses. A company with a high gross margin -- say 60% or above -- has a path to hit breakeven even if it's not profitable now, especially if its sales numbers continue to rise.
Three stocks that investors should consider adding to their portfolios today -- all of which are growing and have high gross margins -- are Veeva Systems (NYSE: VEEV) , DocuSign (NASDAQ: DOCU) , and Activision Blizzard (NASDAQ: ATVI) . Not all of these companies are profitable today, but with great margins, they're in good shape to generate profits over the long term.
Veeva's focus is on providing cloud-based solutions for healthcare companies. Its Veeva Vault product helps companies manage data, while Veeva Commercial Cloud is a customer relationship management solution that promotes more meaningful interactions to drive sales growth. And the California-based company has been growing at a rapid pace. Its most recent quarterly results, released Aug. 27 for the period ending July 31, showed sales of $353.7 million (up 33% year over year) and net income of $93.6 million (up 18%).
For further details see:
3 High-Growth Stocks With Great Margins