Nvidia and AMD stand out on this new list of -2-
Leaving the list of analysts' 20 favorite stocks among the S&P 500 in the same order, here are projected compound annual growth rates for sales and earnings per share from 2023 through 2025. The numbers are based on calendar-year consensus estimates, adjusted if necessary by FactSet for companies whose fiscal years don't match the calendar.
Company Ticker 2-year estimated sales CAGR through 2025 2-year estimated EPS CAGR through 2025
Zoetis Inc. Class A ZTS 7.3% 12.8%
Carnival Corp. CCL 8.8% N/A
Aptiv PLC APTV 5.4% -17.0%
Insulet Corp. PODD 17.1% 14.2%
Las Vegas Sands Corp. LVS 11.0% 44.1%
Advanced Micro Devices Inc. AMD 19.8% 224.3%
Lamb Weston Holdings Inc. LW 7.9% -7.1%
Schlumberger Ltd. SLB 11.9% 19.5%
Prologis Inc. PLD 12.0% 0.3%
American Tower AMT -0.2% 52.0%
News Corp Class A NWSA 2.8% 54.0%
SBA Communications Corp. Class A SBAC 1.0% 12.3%
Live Nation Entertainment Inc. LYV 7.9% 29.0%
First Solar Inc. FSLR 29.9% 64.4%
United Airlines Holdings Inc. UAL 6.5% 22.2%
MGM Resorts International MGM 2.7% -5.7%
Global Payments Inc. GPN 6.8% 87.1%
Nvidia Corp. NVDA 51.9% 69.2%
Bio-Techne Corp. TECH 7.3% 25.2%
VICI Properties Inc VICI 4.2% 5.6%
Source: FactSet
For comparison, the weighted two-year CAGR estimates for the S&P 500 are 5.3% for sales and 12.4% for EPS.
One-time events can affect earnings results. This is one reason you should do your own research to form your own opinion about how well a company has been doing and how likely it is to remain competitive over coming years, before investing into an individual stock.
Carnival Corp. (CCL) has been estimated to have broken even for calendar 2023, with EPS increasing to $1.05 in 2024 and $1.46 in 2025, so there is no expected EPS CAGR on the list.
For Aptiv PLC (APTV), the two-year projected CAGR is negative. But the company said its reported EPS of $10.39 for 2023 would be reduced to $4.86 if special items were excluded. The consensus EPS estimate for Apriv's 2024 EPS is $5.74. With a consensus 2025 EPS estimate of $7.16, the expected two-year CAGR would be 21.4% from the adjusted EPS of $4.86 for 2023.
Looking back - ROIC and total returns
One way to look for quality in the stock market is to consider how well management teams have allocated investors' capital. According to FactSet, a company's return on invested capital, or ROIC, is its profit divided by the sum of the carrying value of its common stock, preferred stock, long-term debt and capitalized lease obligations. FactSet's quarterly ROIC calculations are actually a 12-month look back. For five-year average ROIC, we looked at the numbers for the most recent quarter, then four quarters previous, and so on, to average the five most recent available four-quarter periods.
ROIC is an annualized figure that sheds light on a management team's ability to make the most efficient use of the money invested to fund its business. It isn't a perfect tool to measure performance, in part because different industries are naturally more capital-intensive than others.
Keep in mind that the carrying value of a company's stock may be much lower than its current market capitalization. The company may have issued most of its shares many years ago at a price much lower than today's. If a company has issued a relatively large amount of newer shares recently, or at high prices, its ROIC will be lower. If a company has low debt, its ROIC is higher. If a company is being forced to increase borrowings, especially as interest rates are rising, its ROIC will go down.
Since companies' fiscal quarters don't necessarily match the calendar, announcements of preliminary quarterly results may not include enough data for FactSet to calculate ROIC immediately. The ROIC for that quarter will become available when the company files its quarterly 10-Q report or annual 10-K report with the Securities and Exchange Commission.
So for this group of 20 companies, we looked back at either 16 or 17 quarters to calculate five-year average ROIC:
Company Ticker 5-year average ROIC 5-year minimum ROIC 5-year maximum ROIC Five-year return Zoetis Inc. Class A ZTS 18.4% 16.9% 20.5% 53% Carnival Corp. CCL -10.8% -27.6% 5.5% -72% Aptiv PLC APTV 11.3% 4.2% 17.7% -22% Insulet Corp. PODD 2.7% 0.2% 10.3% 102% Las Vegas Sands Corp. LVS 0.3% -9.6% 12.0% -29% Advanced Micro Devices Inc. AMD 22.4% 1.5% 50.4% 430% Lamb Weston Holdings Inc. LW 15.3% 7.5% 24.8% 28% Schlumberger Ltd. SLB -3.5% -42.9% 14.1% 25% Prologis Inc. PLD 4.6% 3.5% 5.9% 59% American Tower AMT 4.7% 3.1% 6.7% 0% News Corp Class A NWSA -0.1% -7.9% 4.6% 103% SBA Communications Corp. Class A SBAC 3.1% 0.3% 5.6% 4% Live Nation Entertainment Inc. LYV -6.8% -29.7% 4.6% 38% First Solar Inc. FSLR 4.9% -2.0% 12.5% 192% United Airlines Holdings Inc. UAL -2.1% -20.4% 6.8% -42% MGM Resorts International MGM 3.3% -3.9% 9.1% 58% Global Payments Inc. GPN 1.8% 0.3% 2.7% -10% Nvidia Corp. NVDA 31.6% 12.3% 69.8% 1547% Bio-Techne Corp. TECH 10.9% 9.7% 12.7% 34% VICI Properties Inc VICI 5.5% 4.2% 6.4% 65%
Nvidia has had the highest five-year average ROIC on the list and has had the highest five-year total return of 1,547% for its shares, through Friday's close.
Advanced Micro Devices Inc. (AMD) has ranked second for ROIC and second by five-year return, which has been 430%.
It is interesting that among the entire group of 20 companies, only five have outperformed the S&P 500 for five years through Friday, including Nvidia, AMD, First Solar Inc. (FSLR), News Corp (NWSA) and Insulet Corp. (PODD).
News Corp is the parent of MarketWatch publisher Dow Jones.
Don't miss: Eight stock picks in AI, obesity drugs, e-commerce and other growth areas beyond the S&P 500
-Philip van Doorn
This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
04-22-24 1224ET
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