Nvidia is the No. 1 S&P 500 growth stock in this screen. See which other companies joined or left the list.
By Philip van Doorn
An updated screen of the S&P 500 by expected growth rates for sales, earnings and cash flow shows many changes from last year's list
A year ago we screened the S&P 500 for companies expected to increase sales, profits and free cash flow most rapidly over the following two years. The screen was based on estimates among analysts working for brokerage firms. Now it is time to update the numbers for a new list.
When screening stocks, investors and analysts can look back, look ahead or use a combination of both to narrow down a list before digging deeper into individual companies. This recent five-year comparison of returns for groups of stocks selected by a backward-looking screen or by analysts' ratings and price targets produced an interesting result that argued for the validity of both approaches.
In today's stock screen, we will look ahead, but we will also see how well stocks selected with the same criteria a year ago have fared.
The new screen
This screen of the S&P 500 SPX follows the same criteria as one we did in late March of last year, except that the estimates being used are for a year later. Here's how we narrowed down the U.S. large-cap benchmark index:
We used calendar-year consensus estimates for 2023, 2024 and 2025 for a uniform set of data. About 20% of S&P 500 companies have fiscal years that don't match the calendar, and some of these don't even match calendar month-ends. So even the 2023 data are estimates; they are based on actual financial reports covering the period.Any company for which consensus estimates were unavailable or negative for earnings or free cash flow per share for any year was excluded. This brought the list down to 322 companies. Free cash flow is a company's remaining cash flow after capital expenditures. This money can be used to expand, pay dividends, repurchase shares or engage in other corporate activities that (hopefully) benefit shareholders. FCF estimates aren't available for most companies in the financial sector.Then we narrowed further to companies for which the estimates predict compound annual growth rates (CAGR) of at least 15% for sales, 10% for earnings per share (EPS) and 10% for free cash flow per share (FCF) from 2023 through 2025. This brought the list down to 11 companies.
This is the same number that passed last year's screen, but only three of the companies were on last year's list. More about last year's list is below.
Once again it is appropriate to point out that this approach is meant for aggressive long-term growth investors. It is one way to narrow down large-cap U.S. stocks before doing your own research and forming your own opinion about how likely a company might be to remain competitive while providing goods or services over the next decade.
Here's the new list, sorted by expected sales CAGR from 2023 through 2025:
Company Ticker Two-year estimated sales CAGR through 2025 Two-year estimated EPS CAGR through 2025 Two-year estimated FCF CAGR through 2025
Nvidia Corp. NVDA 51.7% 56.8% 62.0%
Blackstone Inc. BX 24.5% 24.4% 105.5%
Broadcom Inc. AVGO 23.2% 16.7% 19.4%
Eli Lilly and Co. LLY 22.7% 69.5% 259.5%
Newmont Corp. NEM 22.1% 27.4% 199.3%
ServiceNow Inc. NOW 21.0% 21.7% 19.0%
Advanced Micro Devices Inc. AMD 19.7% 44.1% 149.4%
DexCom Inc. DXCM 19.3% 21.4% 37.1%
Targa Resources Corp. TRGP 17.7% 35.5% 102.3%
Insulet Corp. PODD 17.1% 17.0% 103.5%
Uber Technologies Inc. UBER 16.1% 49.4% 42.9%
Source: FactSet
Click the tickers for more about each company, including corporate profiles, financials, ratings, estimates and price ratios.
Click here for Tomi Kilgore's detailed guide to the wealth of information available for free on the MarketWatch quote page.
It turns out that only Nvidia Corp. (NVDA), ServiceNow Inc. (NOW) and DexCom Inc. (DXCM) remain on the list from last year. Tesla Inc. (TSLA) dropped off the list, missing the targeted CAGR estimates for sales and EPS growth through 2025, but showing an impressive expected FCF CAGR. Below is more the old list and how those stocks have performed since that screen was done.
First, here's another set of information about the new list, with forward price-to-earnings ratios based on consensus EPS estimates for the next 12 months and a summary of analysts' opinions:
Company Ticker Forward P/E Share "buy" ratings April 12 price Consensus price target Implied 12-month upside potential
Nvidia Corp. NVDA 33.7 88% $881.86 $981.70 11%
Blackstone Inc. BX 23.6 33% $123.47 $127.89 4%
Broadcom Inc. AVGO 26.0 78% $1,344.07 $1,529.91 14%
Eli Lilly and Co. LLY 53.2 75% $751.64 $823.47 10%
Newmont Corp. NEM 17.2 63% $38.64 $45.19 17%
ServiceNow Inc. NOW 55.0 86% $768.71 $854.77 11%
Advanced Micro Devices Inc. AMD 38.7 78% $163.28 $200.23 23%
DexCom Inc. DXCM 71.7 88% $136.14 $151.03 11%
Targa Resources Corp. TRGP 19.5 96% $114.69 $118.71 4%
Insulet Corp. PODD 53.9 83% $175.22 $236.02 35%
Uber Technologies Inc. UBER 51.1 90% $75.28 $88.24 17%
Source: FactSet
As we pointed out last year, this approach leads to a list with forward P/E ratios that mostly appear high relative to the S&P 500, which trades for a weighted 20.5 times consensus earnings estimates among analysts polled by FactSet.
Last year's screen
Looking back to results from the same screen of the S&P 500 done late in March of last year, here's how that group of 11 stocks fared in the new screen. We have left the list in the same order as they were on last year's list, which was sorted by the expected sales CAGR through calendar 2024 at that time. This update includes price changes from March 25, 2023 (the last close before data for last year's list was pulled) through Friday. The three bolded companies are the ones that also made the new list.
Company Ticker Price change from March 25, 2023 through April 12, 2024 Two-year estimated sales CAGR through 2025 Two-year estimated EPS CAGR through 2025 Two-year estimated FCF CAGR through 2025 Enphase Energy Inc. ENPH -40% 0.0% 11.0% -0.1% Tesla Inc. TSLA -10% 13.9% 8.8% 38.3% Albemarle Corp. ALB -44% -15.1% -28.7% -70.4% Take-Two Interactive Software Inc. TTWO 25% 21.8% 79.9% N/A Paycom Software Inc. PAYC -27% 11.5% 6.5% 13.3%
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