Each earnings season, traders obsess over two numbers above all else: EPS and revenue. But seasoned traders know share prices often respond to the direction of EPS and revenue growth rather than their magnitude and size.
A company with a low price-to-earnings ratio may look cheap to value investors at first glance. But if its EPS is declining over time, it could be a major red flag that something is fundamentally wrong with a company’s business model. Companies can milk earnings from businesses in secular decline for years, but those earnings declines almost always catch up to investors eventually.
Largest Projected EPS Declines
Many stocks experience short-term EPS fluctuations on a quarter-by-quarter basis. However, these 15 S&P 500 stocks are projected to have the largest EPS declines over the next five years, according to Finviz:
- Newell Co (NASDAQ: NWL), -14% growth.
- Western Digital Corp (NASDAQ: WDC), -13.8% growth.
- SL Green Realty Corp (NYSE: SLG), -10.8% growth.
- HollyFrontier Corp (NYSE: HFC), -10.3% growth.
- Diamond Offshore Drilling Inc (NYSE: DO), -10.1% growth.
- Delphi Technologies PLC (NYSE: DLPH), -9.8% growth.
- ConocoPhillips (NYSE: COP), -9.6% growth.
- State Street Corp (NYSE: STT), -9.5% growth.
- Archer Daniels Midland Co (NYSE: ADM), -8.8% growth.
- Kraft Heinz Co (NASDAQ: KHC), -8.2% growth.
- Nektar Therapeutics (NASDAQ: NKTR), -7.3% growth.
- FirstEnergy Corp. (NYSE: FE), -6.6% growth.
- Prologis Inc (NYSE: PLD), -6.0% growth.
- Phillips 66 (NYSE: PSX), -4.7% growth.
- Nucor Corporation (NYSE: NUE), -4.1% growth.
It may be tempting to buy some of these stocks give many of them trade at very attractive earnings multiples. However, unless they can stop the earnings bleeding in the near future, the heavy losses most of these stocks have endured in the past year will likely continue.
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14 Stocks With The Highest Long-Term Projected Earnings Growth Rates
13 Stocks With The Highest EPS Growth Over The Past 5 Years
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