/chart_graph_growth_uptrend_screen_shutterstock_551603476-5bfc2e5f46e0fb0051be5f26.jpg)
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 Meta (FB), formerly Facebook, Amazon.com Inc. (AMZN), and Netflix Inc. (NFLX).
Growth stocks, as represented by the Russell 1000 Growth Index, have underperformed the broader market over the past year. The Growth Index has provided a total return of 6.6% over the past 12 months, below the benchmark Russell 1000 index’s 11.7% total return, as of Jan. 26, 2022. All statistics in the tables below are also as of Jan. 26, 2022.
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
- LyondellBasell Industries NV: LyondellBasell Industries is a chemical company. It manufactures plastics and chemicals used to make food packaging, home furnishings, automotive components, paints and coatings, and similar items. On Dec. 13, LyondellBasell announced that Peter Vanacker, President and Chief Executive Officer (CEO) of oil refining and marketing company Neste Corp., would become its new CEO. Vanacker will assume the role no later than June 2022. LyondellBasell’s previous CEO, Bhavesh Patel, retired on Dec. 31, 2021. Ken Lane, previously an executive for the company’s Global Olefins & Polyolefins business, is interim CEO.
- Nielsen Holdings PLC: Nielsen Holdings is a global data and analytics company focused on the media industry. It offers audience measurement and various analytics services. Its services are used by media publishers, marketers, and businesses in the consumer-packaged goods industry.
- Royalty Pharma PLC: Royalty Pharma acquires biopharmaceutical royalties. The company partners with companies to co-fund clinical trials and product launches. It also holds a portfolio of existing royalties acquired from original innovators. On Jan. 6, Royalty Pharma announced a Q1 2022 dividend of $0.19 per Class A share. This represents a 12% increase over the previous quarterly dividend. The dividend will be paid on March 15 to shareholders as of Feb. 18, 2022.
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
- Upstart Holdings Inc.: Upstart Holdings is a holding company whose subsidiaries offer a cloud-based artificial intelligence lending platform to make credit more available. The platform also helps bank partners to reduce lending risks.
- International Flavors & Fragrances Inc.: International Flavors & Fragrances produces ingredients and solutions for the food and beverage, pharmaceutical, health and wellness, home, and personal care industries. The company provides a portfolio of ingredients used to improve nutritional value, texture, and functionality in a variety of food and beverage applications. On Jan. 20, the company announced that Frank Clyburn would become CEO effective Feb. 14, 2022. Clyburn was most recently executive vice president and president of human health for Merck & Co. Inc. In the process of the executive transition, International Flavors & Fragrances will separate its CEO and board chairman roles. Dale Morrison, a longtime director, will become non-executive chairman of the board of directors on Feb. 14.
- 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. The company most recently reported earnings for Q3 2021, ended Sept. 30. For that period, net income grew nearly five-fold to $613.1 million compared to combined pro forma net income in the same period a year earlier. Th company posted robust net sales growth, fueled by the company’s Jan. 1, 2021 merger with BMC, commodity inflation, and strong organic growth.
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
- LyondellBasell Industries NV: See above for company description.
- Nucor Corp.: Nucor is a maker of carbon and alloy steel, steel deck, steel bearing products, cold finished steel, and other products. The company also is a broker of various types of metals. Nucor announced on Jan. 12 that it will spend $2.7 billion to build a new sheet steel mill in Mason County, West Virginia. The new mill will have the capacity to produce three million tons of steel annually and employ approximately 800 people full time.
- Steel Dynamics Inc.: Steel Dynamics is a carbon-steel producer and metals recycler. The company offers products including flat-rolled steel sheet, structural beams, and engineered bar special-bar-quality.
The comments, opinions, and analyses expressed herein are for informational purposes only and should not be considered individual investment advice or recommendations to invest in any security or adopt any investment strategy. While we believe the information provided herein is reliable, we do not warrant its accuracy or completeness. The views and strategies described in our content may not be suitable for all investors. Because market and economic conditions are subject to rapid change, all comments, opinions, and analyses contained within our content are rendered as of the date of the posting and may change without notice. The material is not intended as a complete analysis of every material fact regarding any country, region, market, industry, investment, or strategy.
