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Growth investing is one of two main fundamental investment strategies, the other being value investing. Investors employing a growth investing strategy will typically place the majority of their portfolio in growth stocks, which are shares of companies with earnings or sales 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 that 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 slightly underperformed the broader market over the past year. The Growth Index has provided a total return of 39.6% over the past 12 months, just below the Russell 1000 Index’s 40.7% total return, as of Sept. 23, 2021. All statistics in the tables below are also as of Sept. 23, 2021.
Here are the top three stocks with the fastest earnings per share (EPS) growth, the top three stocks with the fastest sales growth, and the top three 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) 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 more than 2,500% were excluded as outliers.
Source: YCharts
- Freeport-McMoRan Inc.: Freeport-McMoRan is a leading international mining company with significant reserves of copper, gold, and molybdenum. The company has operations in North and South America and Indonesia. On Sept. 22, Freeport-McMoRan announced a cash dividend of $0.075 per share on shares of common stock. The dividend is payable on Nov. 1 to stockholders of record as of Oct. 15, 2021.
- Ross Stores Inc.: Ross Stores operates off-price apparel and home accessories stores. The company operates Ross Dress for Less and dd’s DISCOUNTS stories across the United States.
- Chipotle Mexican Grill Inc.: Chipotle Mexican Grill owns and operates a chain of restaurants serving burritos, bowls, tacos, and salads. The company has locations throughout the United States. On Sept. 21, Chipotle announced the launch of a special, Mexican-inspired smoked brisket for a limited time at locations throughout the U.S. and Canada. Chipotle said that smoked brisket is consistently among the top requested menu items.
Top Growth Stocks by Sales Growth
These are the stocks with the highest 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, as well as find growing companies that have not yet reached profitability. In addition, EPS 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 more than 2,500% were excluded as outliers.
Source: YCharts
- ConocoPhillips: ConocoPhillips focuses on oil and natural gas exploration and production, with operations across 15 countries. It produces crude oil, bitumen, natural gas, natural gas liquids, and liquefied natural gas. ConocoPhillips reported on Sept. 20 that it would acquire for $9.5 billion in cash from Shell Enterprises LLC a Permian Basin position. The purchase includes roughly 225,000 net acres and more than 600 miles of crude, gas and water pipelines and infrastructure.
- Builders FirstSource Inc.: Builders FirstSource makes and distributes building products and provides integrated services to professional homebuilders. It’s one of the largest suppliers in the building industry. Builders FirstSource announced the completion of two acquisitions in early September: California TrusFrame LLC, a designer and builder of prefabricated structural building components; and the Apollo software platform, which performs construction budgeting, scheduling, and field task assignments. Builders FirstSource acquired California TrusFrame for $179.5 million in cash, and Apollo for $4.5 million.
- Valero Energy Corp: Valero Energy is a refiner and marketer of transportation fuels and petrochemical products, including gasolines, distillates, lubricants, and jet fuel. Its operations include 15 petroleum refineries with a total throughput capacity of about 3.2 million barrels per day and 14 ethanol plants with a combined production capacity of 1.73 billion gallons per year.
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 YOY percentage revenue growth and most recent quarterly YOY EPS growth. Both sales and earnings are critical factors in the success of a company. Moreover, 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 more than 2,500% were excluded as outliers.
Source: YCharts
- Freeport-McMoRan Inc.: See above for company description.
- Ross Stores Inc.: See above for company description.
- Louisiana-Pacific Corp.: Louisiana-Pacific Corp. makes building materials and engineered wood products used in home construction. Its primary market is in North America but it also has capacity in Chile and Brazil. The company’s products include oriented strand board sheathing, siding and trim, i-joists, laminated veneer lumber, and similar products.
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