Investors who prioritize growth stocks are constantly on the lookout for opportunities to harness above-average financial growth and secure impressive returns. Identifying a strong growth stock, however, isn’t a straightforward task. These stocks are often associated with increased volatility and higher-than-average risk. Moreover, there’s always a risk of investing in a stock whose growth story is waning.
Research consistently demonstrates that stocks exhibiting the best growth attributes tend to outperform the market. The returns are even more impressive for stocks that combine a Growth Score of A or B with a Strong Buy or Buy rating.
Amazon (NASDAQ:AMZN) is one such stock that is currently recommended, as it boasts a favorable Growth Score and a top rating.
Here are three compelling reasons why Amazon, the online retail giant, is a strong growth investment opportunity:
Earnings Growth
Earnings growth is arguably the most critical factor for investors, as stocks with rapidly increasing profit levels tend to attract significant attention. For growth investors, double-digit earnings growth is highly desirable and often an indicator of strong prospects and potential stock price gains.
While Amazon’s historical earnings per share (EPS) growth rate is 9.9%, the focus should be on projected growth. The company’s EPS is anticipated to surge by an astonishing 214.5% this year, significantly surpassing the industry average projection of 40.7%.
Impressive Asset Utilization Ratio
Growth investors often overlook the asset utilization ratio, also known as the sales-to-total assets (S/TA) ratio, but it’s a crucial aspect of a genuine growth stock. This metric reveals how efficiently a company leverages its assets to generate sales.
Currently, Amazon boasts a S/TA ratio of 1.17, signifying that the company generates $1.17 in sales for every dollar in assets. When compared to the industry average of 0.77, it’s evident that Amazon operates more efficiently. Additionally, Amazon is well-positioned for sales growth, with a projected 11% increase this year, whereas the industry average remains stagnant at 0%.
Promising Earnings Estimate Revisions
Further validation of a stock’s superiority in terms of the metrics outlined above can be obtained by assessing the trend in earnings estimate revisions. A positive trend is highly favorable, given the strong correlation between these trends and near-term stock price movements.
Amazon’s current-year earnings estimates have seen upward revisions, with the Zacks Consensus Estimate for the current year increasing by 0.1% over the past month.
Conclusion
Amazon’s exceptional Growth Score combined with its positive earnings estimate revisions, positions it favorably for potential outperformance. This makes Amazon an attractive choice for growth-oriented investors who seek promising opportunities.
Featured Image: Unsplash
Author Faith Yakubu 
