There’s an age-old debate on Wall Street between growth investors and value investors. Growth investors often argue that value stocks are stagnant and have limited upside. Value investors argue that growth stocks are overpriced and high risk. But value investors should remember that even the best value stocks had to grow their way into their current EPS.
There are plenty of growth stocks out there that generate impressive revenue numbers but have yet to demonstrate the company’s business model can turn a profit. At the same time, there are value stocks out there that trade at an attractive earnings multiple but have flat or lackluster EPS growth.
Somewhere in the middle, there are companies with extremely high earnings growth. They may not necessarily be value stocks, but their earnings growth demonstrates they're profitable and on the right long-term track.
Sometimes, temporary market conditions or accounting shenanigans can make a company profitable for a single quarter or even a single year. But by looking at long-term trends in EPS growth, investors can get a better sense of which companies are turning on the cash spigot and which ones are simply trying to get an earnings report pop.
Highest Earnings Growth Stocks
Here are the 13 stocks in the S&P 500 that have generated the most EPS growth over the past five years, according to Finviz.
- Starbucks Corporation (NASDAQ: SBUX), +262.4% EPS growth.
- UDR, Inc. (NYSE: UDR), 171.3% EPS growth.
- Electronic Arts Inc. (NASDAQ: EA), 165.3% EPS growth.
- T-Mobile Us Inc (NASDAQ: TMUS), 130.5% EPS growth.
- Amazon.com, Inc. (NASDAQ: AMZN), 102.0% EPS growth.
- ABIOMED, Inc. (NASDAQ: ABMD), 99.7% EPS growth.
- Duke Realty Corp (NYSE: DRE), 91.7% EPS growth.
- Vulcan Materials Company (NYSE: VMC) 89.6% EPS growth.
- Devon Energy Corp (NYSE: DVN), 88.6% EPS growth.
- Waste Management, Inc. (NYSE: WM), 84.2% EPS growth.
- Applied Materials, Inc. (NASDAQ: AMAT), 83.0% EPS growth.
- AvalonBay Communities Inc (NYSE: AVB), 73.0% EPS growth.
- Apartment Investment and Management Co (NYSE: AIV), 71.3% EPS growth.
The companies mentioned above have certainly put up some impressive long-term EPS growth numbers. However, it’s important to understand that some of these companies may have had little or no earnings five years ago.
UDR, No. 2 on the list, still trades at an extremely high forward earnings multiple of 104.4.
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