Let me cut to the chase: Growth stocks smoked value stocks over the last decade -- and it's not even close.
During the last 10 years, the Vanguard Growth ETF has more than doubled the return of its value-oriented cousin, the Vanguard Value ETF.
In light of this fact, many investors would do well to add some growth stocks to their holdings. So, let's take a look at two top growth stocks worth buying right now that investors can hold for the long term: Nvidia (NVDA -0.16%) and Tesla (TSLA -1.74%).
Image source: Getty Images.
Nvidia
When it comes to Nvidia, there are plenty of reasons for investors to be excited. Let's run through a couple of the biggest ones:
- Artificial intelligence (AI): Unless you've been living in a cave, you've probably heard of ChatGPT. It's a language-learning AI model that's showing the world how quickly AI is evolving. Yet, ChatGPT is just the start. AI will reshape the world -- and Nvidia's chips will help power that change. The company's powerful GPU chips will be called on for the massive computing power necessary to clear AI's next big hurdles, like autonomous vehicles and personalized genomic sequencing.
- Bitcoin is back: Wall Street has long known that some of Nvidia's GPUs are used for Bitcoin mining. Now, with Bitcoin back over $30,000, mining operations are likely to increase, and along with it, the demand for Nvidia's GPUs.
At any rate, analysts expect Nvidia's sales to mushroom soon. Wall Street expects the company's revenue to climb 11% to $30 billion this fiscal year (the 12 months ending on Jan. 29, 2024). By the following year, analysts expect sales to top $37 billion, with the growth rate accelerating to 24%.
Of course, buying growth comes at a cost. Nvidia shares currently trade at a price-to-sales (P/S) ratio of 24; its price-to-earnings (P/E) ratio is near an all-time high of 152. So Nvidia isn't for everyone. However, for investors willing to buy and hold, Nvidia appears to be a growth stock that should continue to deliver five, 10, even 20 years into the future.
Tesla
When thinking about growth stocks with excellent long-term prospects, Tesla is a name that cannot be ignored.
Over the last five years, the company has gone from teetering on the edge of bankruptcy to one of the most profitable American companies. Tesla's net income over the last 12 months is a staggering $12.6 billion. That's more than Nvidia and McDonald's -- combined.
TSLA Net Income (TTM) data by YCharts.
What's more, Tesla is just getting started when it comes to production. The company produced 1.37 million vehicles in 2022 -- up 47% year over year. Tesla now has factories up and running in Shanghai, California, Germany, and Texas. It also recently announced plans to open another factory in Shanghai to build its Megapack batteries.
On the flip side, some analysts raised valid concerns that Tesla's vehicle production and delivery figures might fall below expectations this year. However, I'm not worried. A slight miss in production would represent a bump in the road, given Tesla's goal of becoming the world's largest vehicle maker. Moreover, Elon Musk has a history of rolling up his sleeves to sort out production shortfalls firsthand.
Similar to Nvidia, Tesla stock doesn't come cheap. Shares trade at a P/E ratio of 51. On the face of it, that's significantly above the current S&P 500 average, which is around 22. Yet, Tesla's valuation multiples have been coming down as its sales and earnings have grown. Its P/S ratio, for example, has dropped from over 18 to less than 8 today.
TSLA PE Ratio data by YCharts.
In summary, Tesla, in some ways, has already arrived. However, the company still has a long runway of growth ahead of it. Increasing production levels will drive up revenue, which is expected to grow 26% this year and 24% in 2024. And that's an excellent forecast for long-term investors looking for a buy-and-hold growth stock.
