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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 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 42.8% over the past 12 months, slightly underperforming the Russell 1000 index’s 46.3% total return, as of May 25. All statistics in the tables below are as of May 25.
Here are the top 3 stocks with the fastest earnings per share (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) 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
- Fifth Third Bancorp: Fifth Third Bancorp is a diversified financial services company operating banks in the Midwest and Southeast parts of the U.S. The company offers retail and commercial banking, investment advisory, and other services.
- The Cooper Companies Inc.: Cooper Companies is a medical device company made up of two segments: CooperVision, which manufactures products for contact lens wearers, and CooperSurgical, which sells diversified products and services focused on improving women’s health, fertility, and diagnostics. On May 3, the company announced that its CooperSurgical unit had acquired obp Medical Corporation for about $60 million. Cooper Companies said that the deal will strengthen its offerings of OB/GYN medical devices.
- Boston Scientific Corp: Boston Scientific develops, makes, and sells minimally invasive medical devices. Its products are used in a variety of medical areas, including urology, cardiac rhythm management, endoscopy, and neuromodulation.
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, and 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 over 2,500% were excluded as outliers.
Source: YCharts
- Zoom Video Communications Inc.: Zoom Video Communications is a provider of a video-first communication platform and Web conferencing services. On May 19, the company announced the launch of a new platform, Zoom Events, beginning this summer. The new platform will provide event organizers the ability to produce ticketed, live events for broadcast using Zoom for audiences of any size.
- Ross Stores Inc.: Ross Stores operates off-price retail stores that sell apparel and home accessories. The company sells name brand and designer accessories, apparel, footwear, and related products.
- Etsy Inc.: Etsy is an e-commerce company that sells art, supplies, housewares, paper goods, clothing, and similar products. For Q1 2021, the company saw net income rise by 1048.1% as revenue grew by 141.5% YOY.
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 their 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 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) | 321.28 | 94.6 | 368.8 | 1,640 |
| Tesla Inc. ( TSLA) |
604.69 | 582.5 | 73.6 | 1,850 |
| The Cooper Companies Inc. (COO) | 394.49 | 19.4 | 5.3 | 2,220 |
- Zoom Video Communications Inc.: See above for company description.
- Tesla Inc.: Tesla is engaged primarily in the design and manufacturing of electric vehicles, including luxury and mass-market sedans and trucks. It also produces solar energy generation and energy storage products. In Q1 2021, Tesla reported that net income soared as revenue jumped 74%. The gains were fueled by robust vehicle sales as the company delivered close to 185,000 vehicles during the quarter.
- The Cooper Companies Inc.: See above for company description.
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