Amazon and TJX Outshine SpaceX as Growth Stocks
SpaceX's initial public offering (IPO) has caught the attention of investors, but its valuation may be cause for concern. The company is currently losing money and operates a sprawling business that includes social media, rocket manufacturing and launching, broadband, and artificial intelligence.
Instead of investing in SpaceX, two profitable consumer goods companies with growth potential are worth considering: Amazon (AMZN) and TJX Companies (TJX).
Amazon's cloud-computing business, Amazon Web Services (AWS), is a significant contributor to the company's profits. AWS has a competitive advantage due to its enormous size and resources, making it difficult for new entrants to enter the space. In the first quarter of this year, AWS held a 28% market share.
AWS' second-quarter sales grew 36.8% year over year to $42.2 billion, pushing operating income 63.6% higher to $16.6 billion. Amazon's total sales grew 19.6% compared to a year ago, reaching $200.6 billion.
TJX Companies is another growth stock worth considering. The company has been in business for nearly half a century and operates an off-price retail model that allows it to offer merchandise at lower prices than traditional retailers. TJX's same-store sales have continued to show strong growth, with overall fiscal Q1 comps increasing 6%. Diluted earnings per share increased 29% to $1.19.
The valuation of both Amazon and TJX Companies has become more attractive this year, as measured by their price-to-earnings (P/E) ratio. With investors concerned about management's capital expenditures, including $220 billion this year, the P/E multiple for Amazon contracted from well above 30 to 22.