14 Stocks With The Highest Long-Term Projected Earnings Growth Rates
Value investors often look at price-to-earnings ratios to gauge how cheaply a stock is priced. However, some of the stocks with the lowest PE ratios in the S&P 500 have earnings that are trending in the wrong direction.
Macy's Inc (NYSE:M), for example, has a PE of around 5. But it has struggled to maintain revenue and profits in recent years, and it’s poor stock returns reflect those struggles.
Instead of looking at the past or the preset, long-term investors can get ahead of the curve by looking at which stocks are expected to grow earnings the most over the next few years. By focusing on earnings growth rather than revenue growth, investors are weeding out growth stocks that haven’t proven their business model can be consistently profitable. If long-term earnings growth projections are high, the company must be on the right track.
It’s always better to consider several years of projections as well. Sometimes, temporary fluctuations in market conditions can give companies cyclical earnings boosts. Other times, companies can use creative accounting measures to give the appearance of strong earnings over a single quarter or even a single year. That noise gets smoothed out when looking at longer-term projections.
Earnings Growth Stocks
Here are the 14 stocks in the S&P 500 that have the highest projected EPS growth over the next five years, according to Finviz.
- Everest Re Group Ltd (NYSE:RE), 73.1% growth.
- American International Group Inc (NYSE:AIG), 65.3% growth.
- Amazon.com, Inc. (NASDAQ:AMZN), 55.8% growth.
- Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX), 47.3% growth.
- Charter Communications Inc (NASDAQ:CHTR), 45.9% growth.
- Netflix Inc (NASDAQ:NFLX), 44.6% growth.
- Marathon Oil Corporation (NYSE:MRO), 44.6% growth.
- Incyte Corporation (NASDAQ:INCY), 44.3% growth.
- National-Oilwell Varco, Inc. (NYSE:NOV), 41.0% growth.
- Pioneer Natural Resources (NYSE:PXD), 40.8% growth.
- Baker Hughes A GE Co (NYSE:BKR), 38.6% growth.
- First Solar, Inc. (NASDAQ:FSLR), 37.2% growth.
- TechnipFMC PLC (NYSE:FTI), 36.8% growth.
- Under Armour Inc (NYSE:UAA) (NYSE:UA), 35.9% growth.
The companies mentioned above are certainly projected to put up some impressive earnings growth numbers in the years ahead. However, investors should be aware that some of these companies are starting from a base of very little earnings today, making growth much easier to achieve than others that are already putting up significant EPS numbers.
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