Costco stock has surged but Amazon and Nvidia offer better growth potential

From Nasdaq: 2024-10-21 05:25:00

Costco’s stock has surged 54% in the last year, driven by a higher P/E ratio more than earnings growth. Analysts project 9% annualized earnings growth, yet the stock trades at a high P/E of 45. Amazon and Nvidia offer better growth prospects and lower valuations, making them more attractive investments.

Amazon is growing its online sales faster than Costco and has diverse revenue sources, including cloud services. With a 10% revenue growth rate and 22% compound annual sales growth in the last decade, Amazon is well-positioned for superior returns. The stock trades at a lower forward P/E than Costco, making it a better investment option.

Nvidia has seen impressive returns in recent years, benefiting from AI trends and data center growth. With an estimated 38% annualized earnings growth rate and earnings up 168% year over year, Nvidia is poised for continued success. The stock trades at a more reasonable forward P/E than Costco, offering better potential returns.

Investors should be cautious about paying a high P/E for below-average growth. While stocks like Amazon and Nvidia offer strong growth prospects and investment potential, Costco’s single-digit growth rates may not justify its high valuation. Consider investing in companies with higher growth rates and lower valuations for better returns.



Read more at Nasdaq: Should You Buy Costco Stock? These “Magnificent Seven” Stocks Are Cheaper and Growing Faster