3 Key Reasons Why Amazon (AMZN) Appeals to Growth Investors

Investors seeking stocks with above-average financial growth tend to find growth stocks highly appealing, thanks to their potential to generate remarkable returns and capture the market spotlight. However, the challenge lies in identifying growth stocks that will fulfill their potential, especially since such stocks often come with a higher risk and volatility.

Picking a stock where the growth narrative is waning can result in considerable losses. Still, tools like the Zacks Growth Style Score can help investors look past traditional metrics to assess a company's genuine growth prospects.

Amazon (AMZN) appears to be one such stock that currently stands out, backed not only by its attractive Growth Score but also by a high Zacks Rank, suggesting robust growth potential.

Earnings Growth Is Crucial

For growth investors, earnings growth is a critical factor to consider. A company with a higher rate of profit growth typically indicates strong future prospects. Amazon's historical EPS growth is impressive at 10.5%, but its projected growth is even more noteworthy. Expected EPS growth for the current year is pegged at 56.6%, eclipsing the industry's average of 22.4%.

Amazon's Cash Flow Growth Outshines Peers

Cash flow growth is crucial, particularly for growth stocks that rely on it to expand operations without the need for external financing. Amazon's year-over-year cash flow growth stands at 59.4%, outperforming many of its counterparts and significantly exceeding the industry average of -5.6%. Such growth not only reflects the company's current financial health but also its strong historical performance, with a cash flow growth rate of 25.3% over the past 3 to 5 years.

Promising Earnings Estimate Revisions

The momentum of earnings estimate revisions can also be a reliable predictor of near-term stock price movements. Amazon's positive trend in earnings estimate revisions, with the current-year consensus increasing by 14.5% in the past month, bodes well for the stock.

Bottom Line

Amazon's compelling attributes, like its robust Growth Score of A and positive earnings estimate revisions leading to a Zacks Rank #2, set the stage for potentially strong performance. Therefore, growth investors might consider Amazon as a promising addition to their portfolios.

Amazon, Investing, Growth