You couldn't have gone wrong buying shares of Amazon (AMZN -0.73%) or Costco Wholesale (COST -0.47%) in the two companies' early days. A $10,000 investment in Costco when the giant wholesaler went public in 1985 would be worth almost $11.9 million today. If you had bought $10,000 of Amazon's shares after its IPO in 1997 and held them, you'd now have nearly $23.4 million.

Both Amazon and Costco have delivered exceptional gains over the last 12 months, too. But which is the better stock to buy and hold forever?

Two great businesses

The primary reason behind the tremendous stock performances of Amazon and Costco is that both companies have great underlying businesses. However, they're very different from each other.

Amazon is best known for its industry-leading online shopping platform. Its distribution and logistics operations that support this platform, though, are arguably the real secret to the company's e-commerce success. Thanks largely to these operations, Amazon has ranked as the lowest-priced U.S. retailer by Profitero for eight consecutive years.

No company has been better at identifying new growth opportunities over the years than Amazon, in my opinion. It kicked off the cloud services market with the establishment of Amazon Web Services (AWS). Last year, AWS generated $107.6 billion in revenue and operating income of $39.8 billion.

Costco didn't invent the warehouse wholesale market. That honor belongs to Sol Price's Price Club. However, Costco perfected the business model. The company opened its first warehouse in 1983. In less than six years, its sales skyrocketed from $0 to $3 billion -- the first company to achieve such rapid growth. Costco also subsequently merged with Price Club in 1993.

Today, Costco operates 897 warehouses in 14 countries. It also has a significant e-commerce business. The company has 77.4 million paid members and counting. And they're loyal customers: Costco's worldwide membership renewal rate is 90.4%.

Looking ahead

Amazon's greatest growth opportunity is in cloud services. Currently, around 90% of global IT spending remains on-premises, with roughly 10% of spending in the cloud. Amazon CEO Andy Jassy believes this dynamic will flip over the next 10 to 15 years.

With the surging deployment of artificial intelligence (AI) models in the cloud, Jassy's view seems realistic. As the biggest cloud services provider, AWS should be a huge winner from this shift.

Jassy has a similar take on e-commerce. Physical stores still make up between 80% and 85% of the global retail market. Over the next 10 to 20 years, Jassy predicts that the equation will flip, with e-commerce dominating the retail market. Again, Amazon is poised to be a major beneficiary if Jassy is right.

As it has in the past, Amazon is also expanding into new arenas. Advertising should become an even more important growth driver for the company in the coming years on its e-commerce platform and Prime Video. Amazon's planned launches of its Kuiper satellites to provide internet services is another long-term growth opportunity.

Costco has a clear path to grow as well. Perhaps the most obvious opportunity is international expansion. Most of the company's warehouse locations are in the U.S.

Adding products and services that boost profits at existing and new warehouses is another good way for Costco to grow. For example, the company's Kirkland Signature private-label brands are growing faster than the overall business. Costco also has great expectations for its retail media strategy. It began last year building an ad network using an extensive database of member's buying histories.

E-commerce is another key opportunity for Costco. The company's digital business is growing quickly, with top sales categories including home furnishings, appliances, hardware, and sporting goods.

Better long-term pick?

I like both of these businesses. However, I think that Amazon is hands-down the better long-term pick.

Importantly, Amazon has more growth opportunities than Costco does. Several of those opportunities, notably including cloud services, are also much larger than Costco's.

Interestingly, though, higher growth expectations are baked into Costco's share price than with Amazon. Costco's shares trade at roughly 58.5 times forward earnings, with a price-to-earnings-to-growth (PEG) ratio based on five-year growth projections of 6.36. Amazon has a forward earnings multiple of 35.5 with a PEG ratio of 1.85.

I don't expect Amazon to deliver the same level of growth that it has over the last 20 years. However, this stock should continue to be a winner for investors for a long time to come.