Forget Tesla — These Unstoppable Stocks Are Better Buys

People have a tendency to view something as cheap when its price falls and expensive when the price increases. Tesla, a popular electric vehicle and energy company, has declined by 16% over the past year and is more than 40% off its all-time high.

It must be a bargain, right? Not so fast. The stock still trades at 100 times its estimated 2024 earnings, and the pressure is on Tesla and CEO Elon Musk to perfect its autonomous driving technology. In other words, Tesla is arguably an expensive and risky stock, even after its significant price decline.

Perhaps you should consider your options before rolling the dice on Tesla stock.

Here are two stocks that have surged higher over the past year and have the fundamentals to continue rewarding long-term investors.

1. A surging aviation stock with room to run

The industrial conglomerate known as General Electric by generations of investors is gone. Today, after multiple spinoffs, GE Aerospace (GE 0.68%) stands in its place. The company has shown Wall Street that a smaller, more focused business can be better. GE Aerospace is one of the leading manufacturers of turbine engines for commercial and military customers. There are tens of thousands of GE engines in the wild, all needing maintenance and servicing to stay in tip-top shape. Approximately 70% of GE Aerospace’s revenue comes from these recurring needs, which makes the stock more resilient in all economic climates than many other industrial companies.

GE Aerospace should enjoy strong growth for years. Global air travel is poised to grow through the 2040s as the population grows and economies in emerging markets mature. GE’s management is currently guiding for low-double-digit revenue growth through 2028, and analysts believe the company will grow earnings by an average of 24% annually for the next three to five years. Ironically, that’s a couple of percentage points higher than Tesla’s earnings growth estimates.

Remarkably, shares of GE Aerospace have nearly doubled over the past year. And yet the stock trades at 43 times its estimated 2024 earnings, less than half the valuation Tesla enjoys. So, you get superior estimated earnings growth at a far less demanding valuation. Plus, Tesla is very expensive compared to your typical automotive stock because the market is pricing in the upside of autonomous driving. What if it doesn’t work out? GE Aerospace doesn’t have that potential risk of a make-or-break catalyst like that, so investors are getting a much more straightforward path to investment returns with GE Aerospace.

2. Business should remain steady for this defense stock

Worldwide geopolitical tensions have boosted defense stocks like RTX (RTX -0.56%). Shares are up over 50% over the past year and are arguably still a buy today. RTX is a conglomerate that builds various weapons and equipment for the United States government and its allies, as well as aircraft engines and systems for commercial and military applications. Unlike a consumer-driven company like Tesla, RTX’s largest customer is the United States, which is no stranger to spending money and has virtually bottomless pockets.

The U.S. government’s soaring debt is a valid long-term concern, but it’s hard to see the government cutting back on defense anytime soon. America’s allies face ongoing conflicts in Europe and the Middle East, and the U.S. has already demonstrated its willingness to support them with military resources. Meanwhile, RTX, which generates significant revenue from commercial aviation, should enjoy the same industrywide growth as GE Aviation over the coming decade and beyond.

Analysts believe RTX will grow earnings by more than 10% annually over the next three to five years. That’s not as fast as Tesla or GE Aviation, but the stock is far cheaper. RTX currently sports a forward P/E of 22 times earnings, a reasonable price for a wide-moat business like RTX and its expected growth. Plus, investors get the bonus of a solid dividend that yields 2% today. Investors could reasonably expect low-double-digit total returns, barring any significant changes to RTX’s valuation or business performance. RTX probably doesn’t have the potential upside Tesla does, but it offers solid returns without nearly as much stress.