Cloudflare currently trades at $101.61 and has been a dream stock for shareholders. It’s returned 422% since November 2019, blowing past the S&P 500’s 91.1% gain. The company has also beaten the index over the past six months as its stock price is up 35.1% thanks to its solid quarterly results.

Is it too late to buy NET? Find out in our full research report, it’s free.

Why Is NET a Good Business?

Founded by two grad students of Harvard Business School, Cloudflare (NYSE:NET) is a software as a service platform that helps improve security, reliability and loading times of internet applications and websites.

1. Skyrocketing Revenue Shows Strong Momentum

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can have short-term success, but a top-tier one grows for years. Thankfully, Cloudflare’s 38.7% annualized revenue growth over the last three years was exceptional. Its growth surpassed the average software company and shows its offerings resonate with customers.

2. Billings Surge, Boosting Cash On Hand

Billings is a non-GAAP metric that is often called “cash revenue” because it shows how much money the company has collected from customers in a certain period. This is different from revenue, which must be recognized in pieces over the length of a contract.

Cloudflare’s billings punched in at $447.3 million in Q3, and over the last four quarters, its year-on-year growth averaged 24.8%. This performance was impressive, indicating robust customer demand. The high level of cash collected from customers also enhances liquidity and provides a solid foundation for future investments and growth.

3. Projected Revenue Growth Is Remarkable

Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite, though some deceleration is natural as businesses become larger.

Over the next 12 months, sell-side analysts expect Cloudflare’s revenue to rise by 25.6%. While this projection is below its 38.7% annualized growth rate for the past three years, it is eye-popping and implies the market sees success for its products and services.

Final Judgment

These are just a few reasons why we think Cloudflare is a high-quality business, and with its shares beating the market recently, the stock trades at 17.2x forward price-to-sales (or $101.61 per share). Is now a good time to initiate a position? See for yourself in our comprehensive research report, it’s free.

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