The ultimate growth stock you can buy now for $200

If you're looking for a growth stock to help you build wealth for retirement, it's not enough to simply pick the stock of a growing company that's regularly hitting new highs. There are other important characteristics to look for.

Of course, you want a company with excellent growth prospects, but it is also beneficial to invest in a company that has a loyal customer base that regularly spends money with the company. This makes the company more resilient, especially during recessions and bear markets.

A company that immediately comes to mind is Amazon (AMZN -0.78%)Here are three reasons why.

1. Repeat sales from millions of customers

Amazon has millions of retail customers who regularly use their Prime membership to order multiple items each month. Statista estimates the number of Prime members in the US at 167 million and over 200 million worldwide, with an estimated 42% of Prime members in the US making between two and four purchases each month. This is a big reason why Amazon has grown into a massive company with revenue of $604 billion over the last 12 months (as of June 30, 2024).

Over the past four quarters, Amazon generated $42 billion from subscriptions and $237 billion from its online store. The company has continued to expand its same-day delivery and grocery delivery to Prime members, showing that it has potential to find more ways to increase purchase frequency and boost sales.

Amazon also generates recurring revenue from its enterprise cloud service. Amazon Web Services (AWS) is the world's leading cloud computing provider with millions of customers in over 190 countries. AWS contributes less than 20% of Amazon's total revenue but is its most profitable business, contributing about two-thirds of the company's operating profit.

2. Amazon has enormous growth opportunities

Amazon's online store and cloud business represent a huge market that can secure the company's growth for decades to come.

According to eMarketer, the global e-commerce market is expected to reach $6 trillion this year and $8 trillion by 2028, so Amazon has the advantage of chasing a growing market.

For AWS, the shareholder opportunity is even more lucrative. AWS's revenue grew 19% year-over-year last quarter, reaching $98 billion in trailing-twelve-month revenue, but it's estimated that at least 80% of the company's data hasn't yet moved from on-premises servers to the cloud.

Given these opportunities, AWS could one day grow into a very large company – potentially Amazon's largest source of revenue. The high margins from cloud services would significantly increase Amazon's profitability and drive up the share price.

3. The stock has great upside potential

Based on the price-to-earnings ratio, Amazon always looks expensive. That's because management doesn't run the company to maximize earnings per share, but rather to maximize long-term cash flow from operations.

Taking into account Amazon's cash from operations (CFO) per share, the stock is trading at a price-to-CFO ratio of 18.4. Although the stock has doubled in value over the past five years, it is trading at the lowest price-to-CFO ratio in over 10 years.

AMZN data from YCharts.

Amazon's cash flow from operations has tripled to $107 billion over the past five years. Notice in the chart how the stock's value has skyrocketed as it has followed the company's operating cash flow growth, but shares continue to trade in the same range on a P/CFO basis. Given the opportunities Amazon has in e-commerce and cloud services, operating cash flow will continue to grow over time, and that likely means more new highs for the stock price.

The stock is currently trading just below its recent high of $201, so for an investor with just a few hundred dollars to spare, now is a great opportunity to buy it.