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Growth investing is one of two main fundamental investment strategies. It contrasts with value investing, the other strategy. Investors employing a growth investing strategy will typically place the majority of their portfolio in growth stocks, which are shares of companies whose earnings or sales are expected to grow at a significantly faster rate than the rest of the market. They generally don’t pay dividends at this stage since all earnings are usually reinvested back into the business to generate even more earnings or revenue in the future. The primary way investors expect to earn profits from growth investing is through capital gains. Classic examples of growth stocks include Facebook Inc. (FB), Amazon.com Inc. (AMZN), and Netflix Inc. (NFLX).
Growth stocks, as represented by the Russell 1000 Growth Index, have outperformed the broader market over the past year. The Growth Index has provided a total return of 64.9% over the past 12 months, besting the Russell 1000’s 62.7% total return, as of March 29. All statistics in the tables below are as of March 29.
Here are the top 3 stocks with the fastest EPS growth, the top 3 stocks with the fastest sales growth, and the 3 stocks ranked according to a 50/50 weighting of their combined EPS and sales growth.
Top Growth Stocks by EPS Growth
These are the stocks with the highest year-over-year (YOY) earnings per share (EPS) growth for the most recent quarter. Rising earnings show that a company’s business is growing and is generating more money that it can reinvest or return to shareholders. Companies with quarterly EPS of over 2,500% were excluded as outliers.
Source: YCharts
- Flower Foods Inc.: Flower Foods is a producer and marketer of packaged bakery foods. It sells under brand names such as Nature’s Own, Wonder, and Tastykake. The company’s Q4 2020 net income jumped to $55.8 million, 25 times the year-ago figure. This was aided by easier comparisons to last year, when the company had one-time costs such as restructuring charges and a legal settlement. Its sales rose by 11.5% year-over-year (YOY), but an extra week in this reporting period accounted for more than 70% of the increase.
- The Cooper Companies Inc.: Cooper Companies is a medical device company that has two segments. The CooperVision business manufactures products for contact lens wearers, and CooperSurgical sells diversified products and services, including medical devices, fertility, diagnostics, and contraception. In fiscal Q1 ending January 31, net income attributable to stockholders was $2.1 billion, more than 23 times last year’s number. The big gain was largely driven by a large $2.0 billion income tax benefit. Excluding the one-time gain, Cooper’s income before income taxes rose 43% during the quarter. Sales were up 5.3% YOY.
- Genuine Parts Co.: Genuine Parts distributes automotive and industrial replacement parts through a network at over 3,600 operations in North America, China, Australia, Indonesia, and parts of Europe.
Top Growth Stocks by Sales Growth
These are the stocks with the highest year-over-year (YOY) sales growth for the most recent quarter. Rising sales can help investors identify companies that are able to grow revenue through organic or new ways, and find growing companies that have not yet reached profitability. In addition, earnings per share can be significantly influenced by accounting factors that may not reflect the overall strength of the business. However, sales growth can also be potentially misleading about the strength of a business, because growing sales on money-losing businesses can be harmful if the company has no plan to reach profitability. Companies with quarterly revenue growth of over 2,500% were excluded as outliers.
Source: YCharts
- Liberty Broadcast Corp.: Liberty Broadcast owns and operates a broad range of communications businesses, including interests in broadband and cable company Charter Communications Inc. (CHTR) and GCI Holdings, a provider of wireless, data, video, voice, and managed services to customers primarily in Alaska.
- Quidel Corp.: Quidel develops and manufactures diagnostic healthcare products and solutions. The company’s offerings aid in the detection and diagnosis of critical diseases and other medical conditions. During Q4 2020, Quidel developed and won federal Emergency Use Authorization (EUA) for six COVID-19 diagnostic assays. In Q4, net income rose by more than 15-fold to more than $470 million on a greater than five-fold increase in revenue. Nearly 84% of revenue came from COVID-19 diagnostic products.
- Zoom Video Communications Inc.: Zoom Video Communications is a provider of video communications services. For its 2021 fiscal year (FY), which ended January 31, 2021, net income rose nearly 2,557% as annual revenue increased 325.8%. The company’s exceptionally strong growth was driven by an increase in demand for its services as millions of people globally were forced to work or study from home amid lockdowns and shelter-in-place measures related to the COVID-19 pandemic.
Top Growth Stocks by EPS and Revenue
These are the top growth stocks in the Russell 1000 index as ranked by a growth model that scores companies based on a 50/50 weighting of their most recent quarterly year-over-year (YOY) percentage revenue growth and their most recent quarterly YOY earnings-per-share (EPS) growth. Both sales and earnings are critical factors in the success of a company. Therefore ranking companies by only one growth metric makes a ranking susceptible to the accounting anomalies of that quarter (such as changes in tax law or restructuring costs) that may make one or the other figure unrepresentative of the business in general. Companies with quarterly EPS or revenue growth of over 2,500% were excluded as outliers.
| Top Growth Stocks by EPS and Revenue | ||||
|---|---|---|---|---|
| Price ($) | Market Cap ($B) | Revenue Growth (%) | EPS Growth (%) | |
| Zoom Video Communications Inc. (ZM) | 308.39 | 90.6 | 368.8 | 1,640 |
| Liberty Broadcast Corp. (LBRDA) | 147.74 | 28.9 | 871.0 | 188.0 |
| Quidel Corp. (QDEL) | 123.19 | 5.2 | 431.7 | 1,420 |
- Zoom Video Communications Inc.: See above for company description.
- Liberty Broadcast Corp.: See above for company description.
- Quidel Corp.: See above for company description.
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