When selecting high-quality growth stocks, legendary investor Peter Lynch emphasized understanding the fundamentals of a business, observing consumer trends in everyday life, taking a long-term perspective and combining financial metrics with common sense. This methodology can help identify stocks poised for tremendous expansion like Walmart (NYSE:WMT) in its early days.
By targeting companies that exhibit leadership in their industry but still have ample room to grow both domestically and globally, investors give themselves the opportunity to multiply returns over the long run.
Though risks exist when investing in growth stocks, the returns can also be tremendous if chosen wisely. These stocks show signs of leadership and vast runways that could reward investors over time.
Tesla (TSLA)
As a frontrunner in the electric vehicle revolution, Tesla (NASDAQ:TSLA) has established itself among the growth stocks powerhouses. The company’s latest financials confirm its potential for long-term expansion.
In 2023, Tesla achieved record net income of $15 billion (GAAP), including a substantial $7.9 billion in Q4 alone. This represents a skyrocketing 115% year-over-year growth. Non-GAAP net income also impressed at $10.9 billion.
Additionally, sturdy operating cash flow of $13.3 billion and free cash flow of $4.4 billion demonstrate financial vigor primed for growth. Furthermore, cash and investments swelled by $3 billion in Q4 to a total of $29.1 billion. As a result, Tesla boasts a war chest to fund future opportunities.
Propelling innovation, Tesla’s Full Self-Driving Beta V12 release utilizes artificial intelligence for enhanced vehicle autonomy. This means the company is inching closer to fully driverless functionality.
Plus, the new xAI startup also taps AI, aiming to comprehend the physical world. Moreover, synergies with SpaceX and The Boring Company catalyze cross-industry innovation within Elon Musk’s collaborative network, energizing growth.
Despite challenging economic crosscurrents, Tesla decreased its cost of goods sold per vehicle sequentially to just over $36,000 in Q4. This helped the company uphold profitability and competitiveness through diligent cost discipline, making it one of the better growth stock picks.
Alphabet (GOOGL, GOOGL)
Alphabet (NASDAQ:GOOGL, NASDAQ:GOOGL), the parent company of Google and other emerging technology companies, has shown strong financial performance that qualifies it as a growth stock. In 2023, Alphabet generated $307 billion in total revenue, up 10% from the previous year. Operating income also grew 10% to $84 billion.
The growth has been driven by Google’s core advertising business, YouTube and Google Cloud. Google advertising revenues were up 13% in 2023. YouTube grew even faster at 16% YOY. Meanwhile, Google Cloud revenues soared 26% to over $36 billion in annual run rate.
Alphabet is investing heavily in artificial intelligence (AI) to drive future growth. Its new AI model Gemini is being incorporated into core Google products like search. Over 70% of leading AI startups building generative AI systems are using Google’s cloud platform and infrastructure. Therefore, with strong financial performance, investments in high-growth areas like AI and Google’s continued dominance in digital advertising and cloud computing, Alphabet has compelling qualities of a long-term growth stock. The company expects growth to continue in 2024 across search, YouTube and cloud, powered by AI innovation. For investors, Alphabet offers a balanced growth and value opportunity within tech.
MercadoLibre (MELI)
MercadoLibre (NASDAQ:MELI) has firmly established itself as the leading e-commerce and financial technology platform in Latin America. The company, often referred to as the “Amazon of Latin America,” operates the largest online marketplace and fintech ecosystem in the region.
An analysis of MercadoLibre’s latest financial results and operational metrics confirms its credentials as one of the premier growth stocks.
Thus, in Q4 2023, MercadoLibre delivered revenue growth of 42% YOY on a currency-neutral basis — its fastest expansion since the third quarter of 2022.
For the full year 2023, total revenues approached $14.5 billion, representing an impressive 37% growth over 2022 and more than six times MercadoLibre’s 2019 revenue level.
Powering this top-line growth is the company’s commerce platform. For example, gross merchandise volume expanded by 79%, and the number of items sold grew by 29%. Furthermore, the fintech division impressed with a 153% growth in total payment volume.
Beyond financial results, MercadoLibre is executing on key strategic initiatives. For example, the company is expanding its logistics capabilities, enhancing its credit portfolio and boosting unique buyers on its platform.
With 54.4 million unique buyers at the end of 2023 and robust cash flow generation, MercadoLibre exhibits strong fundamentals and secular growth tailwinds needed in an elite growth stock.
The company’s proven leadership in Latin America’s high-growth e-commerce and digital payments markets cements its status one of the growth stocks worthy of consideration for long-term investors.
On the date of publication, Andrea van Schalkwyk held a long position in GOOGL. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines
