2 Top Growth Stocks to Buy and Hold for the Next 20 Years

In the ever-evolving landscape of the stock market, identifying companies that can sustain long-term growth is a challenge. However, two standout companies, Amazon and Costco Wholesale, have demonstrated resilience and consistent performance over the past two decades, making them prime candidates for long-term investment. Let's delve into the financial health and business models of these two giants to understand why they are poised for continued success.

Amazon: The E-commerce and Cloud Powerhouse

Amazon's meteoric rise over the past 20 years is a testament to its innovative business model and strategic foresight. From 2004 to 2024, Amazon's revenue grew at a compound annual growth rate (CAGR) of 25%, while its net income increased at a CAGR of 26%. This growth was driven by the rapid expansion of its e-commerce marketplace and Amazon Web Services (AWS) cloud platform.



Amazon's online marketplace serves over 315 million customers worldwide, with more than 200 million of those customers locked into its Prime subscriptions. These subscriptions provide free shipping, discounts, digital streaming services, and other perks, creating a sticky customer base that drives repeat business. AWS, on the other hand, controlled 33% of the global cloud infrastructure market at the end of 2024, according to Canalys. This dual focus on e-commerce and cloud services gives Amazon a competitive edge, allowing it to subsidize its lower-margin retail business with its higher-margin cloud business.

From 2024 to 2027, analysts expect Amazon's revenue and earnings per share (EPS) to grow at a CAGR of 10% and 20%, respectively. This sustained growth and profitability make Amazon a strong candidate for long-term investment. Additionally, Amazon's recent expansion into generative AI applications further solidifies its position as a leader in technology and innovation.

Costco Wholesale: The Bulk Discount King

Costco Wholesale has also shown remarkable growth over the past 20 years, with its stock rallying 2,110% from fiscal 2004 to fiscal 2024. During this period, Costco's revenue rose at a CAGR of 9%, and its net income increased at a CAGR of 11%. This steady growth was driven by its store openings, new memberships, and high renewal rates.

Costco's business model focuses on attracting customers with bulk discounts and increasing the stickiness of its memberships with additional discounts for fuel sales, optical services, insurance plans, and vacation packages. This model allows Costco to generate most of its operating profits from membership fees, even though it sells products at low margins. Costco's ability to maintain high renewal rates and attract new cardholders, combined with its strategic store openings, ensures sustained growth.

From fiscal 2024 to fiscal 2027, analysts expect Costco's revenue and EPS to grow at a CAGR of 7% and 10%, respectively. This continued profitability and growth make Costco a reliable long-term investment. Costco's focus on bulk discounts and membership fees ensures that it can maintain profitability even in economic downturns, as customers are likely to seek out bulk purchases to save money.

Financial Health Indicators: A Comparative Analysis

To understand the financial health of Amazon and Costco Wholesale, let's compare their key financial indicators to their industry peers.



# Profitability
Amazon's profitability metrics are generally higher than those of its peers. From 2004 to 2024, its net income increased at a CAGR of 26%, driven by the rapid expansion of its e-commerce marketplace and AWS cloud platform. Costco's profitability metrics are also robust, with its net income increasing at a CAGR of 11% from fiscal 2004 to fiscal 2024. This is higher than many of their industry peers, indicating their ability to generate consistent profits despite economic challenges.

# Liquidity
Both Amazon and Costco Wholesale maintain strong liquidity, with consistently positive cash flow from operations. This is a positive indicator of their financial well-being and ability to meet short-term obligations. Amazon's liquidity metrics are generally better than those of its peers, while Costco's liquidity metrics are competitive with other warehouse retailers, but its focus on membership fees provides an additional layer of financial stability.

# Solvency
Both companies have lower debt-to-equity (D/E) ratios compared to their peers, indicating a stronger financial position and ability to manage debt responsibly. Amazon's solvency metrics are generally better than those of its peers, while Costco's solvency metrics are competitive with other warehouse retailers, but its focus on membership fees provides an additional layer of financial stability.

Conclusion

Amazon and Costco Wholesale stand out as top growth stocks for the next 20 years due to their robust business models, consistent growth, and strategic advantages. Amazon's dual focus on e-commerce and cloud services, combined with its ability to leverage its higher-margin cloud business to subsidize its retail operations, ensures sustained growth and profitability. Costco's focus on bulk discounts and membership fees, combined with its high renewal rates and strategic store openings, ensures long-term sustainability and profitability.

Investors looking for long-term growth and stability should consider adding Amazon and Costco Wholesale to their portfolios. These companies have demonstrated resilience and consistent performance over the past two decades, making them prime candidates for long-term investment.