To The Moon

KEY POINTS

• Nvidia grew its sales by 53%, while Tesla's sales grew 81% year over year in the latest quarter.
• Enphase Energy is expected to grow its earnings at an average rate of 39% over the next few years.

A chipmaker, an electric vehicle leader, and a solar component specialist are reshaping the future.

If you're looking to start investing in stocks, a simple strategy is to go for companies that show consistent growth in revenue and profits. Often, such stocks trade at apremium valuation. However, they still offer the potential to generate handsome returns in the long run.

Let's look at three such companies --Nvidia, Tesla, and Enphase Energy-- that are not only growing fast but are expected to continue doing so in the coming years.

Strong revenue growth

Nvidia's quarterly revenue grew at an average quarterly year-over-year rate of 35% over the last five years. In fiscal 2022's fourth quarter (ended Jan. 30), the company's revenue grew 53% year over year. A global semiconductor shortage, coupled with increased demand from areas such as artificial intelligence, autonomous vehicles, robotics, virtual reality, and themetaverse, is contributing to Nvidia's exceptional growth.

Similarly, Tesla's recent growth has been phenomenal. The electric vehicle leader grew its quarterly sales at an average year-over-year rate of 54% in the last five years. In the first quarter, the company's sales grew 81% year over year.

Likewise, solar microinverter manufacturer Enphase Energy's revenue grew at an average rate of 46% over five years. Further, in thelatest quarter, the revenue growth was close to this average rate.

Solid expected growth

While it is important to monitor historical growth, it is more important to see if a company can sustain the growth level in the future. The three companies seem to be well placed to do so.

Analysts expect Nvidia's quarterly revenue to rise to $9.3 billion for the company's fiscal quarter ending Jan. 30, 2023, from $7.6 billion in the last quarter.

Likewise, Tesla's quarterly revenue is expected to rise to $28.2 billion, while Enphase Energy's revenue is expected to reach $597.6 million in Q1 2023.

Analysts also expect the three companies to grow their earnings impressively. Nvidia is expected to grow its per-share earnings at an average rate of around 25% over the next three to five years. Similarly, Enphase Energy is expected to grow earnings at an average rate of 39%, while Tesla's average growth rate is estimated to be 43%.

Demand for electric vehicles exceeds supply right now. Although legacy car companies are expanding their offerings in the electric segment, Tesla seems to havean edge over the competitionin terms of demand for its cars, ability to expand its production capacity and securing the necessary input parts and materials.

Similarly, Nvidia'sleadership positionin the graphic processing unit market and its partnerships with leading computer makers and cloud service providers give the company a competitive advantage. Likewise, Enphase's microinverters see huge demand, thanks to the benefits they offer over other inverter options.

Overall, the three stocks look well placed to maintain their strong growth in the coming years as well.