Longtime investors know the stock market is forward-looking. That means a stock’s share price is more a reflection of what investors collectively think the company will do in the future than what it did in the past or what it's doing in the future.
The forward-looking nature of the stock market makes sense if you consider why people buy shares of stock in the first place. People don’t typically buy a stock and hope the stock price remains the same. They're hoping the share price goes up because they're anticipating good things from the company’s future.
Growth stocks like Amazon.com, Inc. (NASDAQ: AMZN) and Netflix, Inc. (NASDAQ: NFLX) have led the market higher throughout much of the past decade. They haven’t always been the most profitable stocks, but their massive returns have come due to investors expectations of their long-term revenue growth.
Amazon and Netflix are just now starting to convert their large revenue growth to earnings, but investors that have waited to this point to buy the stocks have missed out on huge gains.
Sales Growth Stocks
Here are the 16 S&P 500 stocks with the biggest revenue growth over the past five years, according to Finviz:
- Diamondback Energy Inc (NASDAQ: FANG), 59.9% growth.
- Broadcom Inc (NASDAQ: AVGO), 52.6% growth.
- Nektar Therapeutics (NASDAQ: NKTR), 51.6% growth.
- Facebook, Inc. (NASDAQ: FB), 48.0% growth.
- Allergan plc (NYSE: AGN), 43.4% growth.
- Arista Networks Inc (NYSE: ANET), 42.9% growth.
- Centene Corp (NYSE: CNC), 40.8% growth.
- Charter Communications Inc (NASDAQ: CHTR), 39.9% growth.
- Incyte Corporation (NASDAQ: INCY), 39.6% growth.
- Twitter Inc (NYSE: TWTR), 35.5% growth.
- Kraft Heinz Co (NASDAQ: KHC), 33.3% growth.
- ABIOMED, Inc. (NASDAQ: ABMD), 33.2% growth.
- IHS Markit Ltd (NYSE: INFO), 30.4% growth.
- Netflix, 29.3% growth.
- Lennar Corporation (NYSE: LEN), 28.2% growth.
- salesforce.com, inc. (NYSE: CRM), 26.7% growth.
As with any other single metric for evaluating a stock, there are caveats to high revenue growth. Some companies boost revenue by mergers and acquisitions, which may not be as sustainable as organic revenue growth.
In addition, high-growth stocks like Uber Technologies Inc (NYSE: UBER) and Tesla Inc (NASDAQ: TSLA) have struggled in the market because they have failed to demonstrate a clear path to convert their revenue to profits in the long-term.
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