We all hope our favorite stocks will crush the market this year. But what's actually more important is their performance over time -- by this, I mean a period of at least five years. The good news is it's much easier to choose these sorts of players than those that will deliver a quick -- and maybe brief -- gain. What suggests long-term potential? Elements like a history of earnings growth and solid growth prospects, for example.
I consider these players easy wealth builders because their quality businesses likely will lead to share gains over time. Many of these fantastic long-term stocks are trading at excellent prices these days. Let's check out three that may help put you on the path to riches.
1. Amazon
Amazon (AMZN 3.43%) might not look like a tempting buy if you consider recent earnings. The company reported its first annual loss in almost a decade -- after struggling with higher inflation and other economic headwinds.
But ignoring this stock market giant today could be a big mistake. That's because Amazon has what it takes to deliver growth over the long term. First, it's important to note Amazon is a leader in two markets growing in the double digits: e-commerce and cloud computing. The company should benefit from this once economic pressures ease.
Second, Amazon is wisely preparing for these better times. The company increased its investment in technology infrastructure last year by $10 billion. This is to support its cloud computing business -- its biggest moneymaker. Amazon also has been growing its Prime subscription service and betting on other areas like healthcare.
Another positive move: Amazon is working to improve its cost structure. That should help it through today's tough times and set it up for success over time. Finally, Amazon's revenue still continues to grow. Last year, it rose 9% to $514 billion.
Today, the stock trades close to its lowest in relation to sales since 2016. This is a great entry point considering Amazon's prospects in both e-commerce and cloud computing in the years ahead.
2. Home Depot
During tough economic times, investors have turned away from companies that depend on consumer spending. But some of these companies actually have held up very well. Home Depot (HD 0.94%) is the perfect example.
The world's biggest home-improvement retailer has seen strength in both its do-it-yourself and professional customers. Demand hasn't weakened for home-improvement projects. In fact, 11 of Home Depot's 14 merchandising departments posted sales growth in the most recent quarter. And six departments even recorded sales growth above the company average.
Importantly, the company's pro customers say backlogs are solid. This is great news because it suggests these customers will continue buying at Home Depot in the coming months to complete these new projects.
And speaking of the pros, they represent an excellent growth opportunity for Home Depot over time. This market is worth $450 billion. Home Depot is working to gain share by making the shopping process seamless for these customers. This includes investment in fulfillment capabilities and the digital platform.
Home Depot shares trade for less than 20 times forward earnings estimates -- and that seems pretty cheap considering the company's progress even during tough times.
3. Nike
Nike (NKE 0.19%) struggled in recent times due to various economic factors: rising inflation, supply chain issues, and negative impact from currency exchanges. But the recent earnings report indicated brighter days may be right around the corner.
The maker of athletic gear said the inventory peak that weighed on earnings is a thing of the past. The company has worked to bring inventory back to healthier levels -- and that should help earnings in the coming quarters.
In spite of the recent challenges, Nike's brand strength has helped it deliver ongoing revenue growth. In the most recent quarter, total revenue, Nike digital sales, and Nike brand direct sales each climbed in the double digits. And diluted earnings per share even inched higher by 2%.
Back in 2017, the company launched an effort to strengthen its digital and direct-to-consumer businesses. And these efforts helped it continue to grow during the worst stages of the pandemic as it connected with fans online. Today, events like new sneaker drops on its SNKRS app continue to drive digital sales.
Nike shares trade for 34 times trailing-12-month earnings. That's down from levels above 60 just a couple of years ago. Nike continues to be a favorite brand around the world. And we've seen that's driven growth even in a tough economy. So, looking ahead, it's reasonable to be optimistic about Nike's earnings prospects -- and share performance over the long haul.
