Growth investors constantly search for stocks that exhibit exceptional growth potential, as they strive to seize opportunities for above-average financial growth, capturing the market’s attention and generating remarkable returns. However, finding such standout growth stocks is no easy feat.

Inherently, these stocks come with a degree of volatility and higher-than-average risk. There’s always the risk of investing in a stock that has already peaked in its growth story or is on the brink of decline.

Here are three compelling reasons why Amazon (NASDAQ:AMZN) is an outstanding growth choice right now:

1. Earnings Growth

Earnings growth is arguably the most critical factor, as stocks with rapidly increasing profit levels tend to attract the attention of most investors. For growth investors, double-digit earnings growth is highly sought after and often a harbinger of strong prospects, resulting in stock price gains.

While Amazon’s historical EPS growth rate stands at 9.9%, it’s vital to focus on projected growth. The company is expected to achieve an astounding 214.5% EPS growth this year, surpassing the industry average’s 40.7%.

2. Impressive Asset Utilization Ratio

Growth investors may occasionally overlook the asset utilization ratio, also known as the sales-to-total-assets (S/TA) ratio. However, it is a key indicator of a genuine growth stock. This metric reveals how efficiently a company utilizes its assets to generate sales.

Amazon’s S/TA ratio currently stands at 1.17, indicating that for every dollar in assets, the company generates $1.17 in sales. In comparison to the industry average of 0.77, Amazon’s efficiency stands out.

Efficiency in sales generation is essential, but so is the company’s sales growth potential. Amazon is well-positioned in terms of sales growth, with an expected 11% increase this year, outshining the industry average of 0%.

3. Promising Earnings Estimate Revisions

The strength of a stock, as indicated by the metrics discussed above, is further substantiated by examining the trend in earnings estimate revisions. A positive trend is undoubtedly favorable. Extensive research underscores a strong correlation between trends in earnings estimate revisions and short-term stock price movements.

Amazon has witnessed upward revisions in current-year earnings estimates, with the Consensus Estimate for the current year rising by 0.1% over the past month.

 

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