The stock market has been up and down like a see-saw lately, with a single comment from President Trump either sending it skyrocketing or nosediving. Growth stocks have been at the forefront of this volatility, as they’re typically valued based on future expectations of profits.
Nevertheless, I think these two high-quality growth shares are worth considering.
Amazon
The first stock that continues to look like a steal to me is Amazon (NASDAQ: AMZN). The firm’s e-commerce operation likely needs no introduction, but it’s the cloud computing business (AWS) that’s the real profitable growth driver here.
In 2024, this division’s sales rose 19% year on year, exceeding $100bn for the first time. And despite only making up 17% of overall revenue, AWS contributed about 58% of total operating income, easily making it the largest profit engine within Amazon.
Overall operating income jumped 86% last year, as artificial intelligence (AI) drives efficiency initiatives and a booming high-margin advertising business also boosted performance.
Somewhat surprisingly though, the Amazon share price has significantly underperformed the S&P 500 over the past five years. Indeed, it’s down 23% since February.
As a result, the stock’s almost as cheap as it has ever been on some metrics. For example, the forward-looking EV/EBIT ratio — which is a metric that compares Amazon’s enterprise value to its forecast annual operating profit — is just 25 today.
That might sound high but it’s actually very cheap, historically speaking. And this Is despite the firm’s operations being as strong as they have ever been.
The forward price-to-earnings (P/E) ratio of 28 is also low. That multiple has tended to be above 50 in the past.
So what’s the catch? Well, there’s a lot of uncertainty about how tariffs will impact Amazon’s profitability. You see, over 50% of third-party sellers on its platform are based in China. If prices rise dramatically, that could mean less consumer spending, and therefore reduced growth and profits. So this is a notable risk here.
Taking a five-year view however, I think Amazon will be just fine. It’s one of the strongest businesses around, with incredible optionality (many ways to keep growing).
Amazon’s likely to carry on benefitting from multiple mega-trends — online shopping, AI, cloud computing, digital advertising, and more.
IHG
Next, I reckon InterContinental Hotels (LSE: IHG) from the FTSE 100 is worth a look. The share price has slumped nearly 30%, from an all-time high of 10,900p in February to less than 7,800p today.
Zooming further out though, IHG stock has still returned more than 100% over the past five years (excluding dividends).
While the recovery of international travel after Covid has helped, the firm’s strong portfolio of hotel brands — including Holiday Inn, Regent, and Crowne Plaza — also continues to expand worldwide.
IHG operates a capital-light franchising model. In other words, it doesn’t own most of its hotels, but instead licenses its brands to third-party owners. This is very profitable.
Naturally, a global recession would present risk, as that could reduce international travel. This largely explains the recent share price weakness.
Again though, I’m bullish on this stock over a longer time frame. The global travel industry is expanding, especially in emerging markets where IHG has a growing presence.
Finally, the forward P/E ratio is around 20 — an attractive discount to recent years.
