Warren Buffett is known for allocating capital with a value-focused mindset. This strategy has worked well for the great investor over the past few decades.

However, it seems like a lot of investors are drawn to businesses that are posting rapid sales and earnings gains. These companies can turn out to be big winners. And even though the market is in record territory right now, there are still opportunities to take advantage of.

Here's why Amazon (NASDAQ: AMZN) is the ultimate growth stock to buy with $1,000 right now.

Growing sales and profit

This company benefits from some powerful secular trends, all propelled by the ways in which technology is changing the economy. Amazon has long been a leader in e-commerce. And today, nearly 40% of all spending online in the U.S. goes through the company's website. There is still a sizable expansionary runway to take share from brick-and-mortar retail.

With Amazon Web Services (AWS), the business has top market share in the important cloud computing industry. This segment has typically been the growth engine, as sales here were up 19% in the latest quarter (Q2 ended June 30). Grand View Research believes the global cloud market will be worth $2.4 trillion by 2030, up from $602 billion last year, giving AWS a favorable backdrop to keep expanding.

These two dominant areas of the business help explain why Amazon's revenue increased at a compound annual rate of 22.7% between 2013 and 2023. Even in 2022, a year that saw higher interest rates deal a blow to many companies, this business still posted an almost 10% sales increase. As the Federal Reserve becomes more accommodative, that figure could rise faster.

Historically, Amazon has foregone posting meaningful earnings in the name of investing aggressively in growth initiatives. That has obviously worked wonders, as the business has seen its share price absolutely skyrocket. But in recent years, Amazon has focused more on boosting the bottom line. And investors should be very pleased.

Operating income totaled $30 billion through the first six months of this year. This represented a huge 141% year-over-year jump. Management is trying to create a more efficient organization, particularly after Amazon invested heavily during the depths of the pandemic to expand its logistics network.

Wall Street is very optimistic, as they forecast annualized sales and earnings per share increases of 10.7% and 36.5%, respectively, between 2023 and 2026. A combination of sustained double-digit revenue growth and strong profit gains is exactly what shareholders want to see from any business that they are looking to own.

Worth the price

Amazon's fundamental drivers are in place. However, the valuation must also be considered before making a decision.

As of this writing, shares trade at a forward price-to-earnings (P/E) ratio of 38.9. That doesn't look like a bargain. In fact, it's 21% more expensive than the overall Nasdaq-100 index.

In my opinion, though, Amazon is worth paying what looks like a premium valuation for. As noted above, the bottom line is set to expand rapidly in the years ahead, which will make the forward P/E multiple look more attractive.

Additionally, it's not hard to argue that this isn't that risky of a business to own. Over the years, Amazon has developed a wide economic moat that continues to protect it from the threat of competition and disruption. The company has an unrivaled scale with its logistics operations, the online marketplace possesses powerful network effects, and the Amazon brand is a key competitive asset that is extremely valuable.

It's true that sometimes, solid investment ideas can be hidden in plain sight. Amazon is a clear example of this.

Should you invest $1,000 in Amazon right now?

Before you buy stock in Amazon, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Amazon wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $765,523!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.

See the 10 stocks »

*Stock Advisor returns as of September 30, 2024

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Neil Patel and his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon. The Motley Fool has a disclosure policy.

The Ultimate Growth Stock to Buy With $1,000 Right Now was originally published by The Motley Fool