The most successful investors of the last 50 years, from Warren Buffett to Peter Lynch, as featured with Forbes, agree, the reason that stocks of some companies rise in price faster and farther than others is because they grow the amount of money they earn for each share of stock they have outstanding faster. What investors call earnings per share growth or EPS growth.
Companies often complete secondary offerings, which dilutes EPS. When the number of shares outstanding increases while earnings remain the same, EPS decreases. Markets for shares of stock with prices that surge on news of secondary offerings are rare and indicate unusual demand; buyers waiting on the sidelines, determined to buy stock, but not wanting to push prices up, yet.
Investor’s Business Daily recommends, among other minimums, that stock traders limit their purchases to shares of companies reporting 25-percent-or-greater EPS growth. Technology investing veterans are familiar with then-Google’s 293 percent EPS growth reported before its shares began their meteoric rise in the mid-2000s. A close inspection of EPS growth rates of other past top-performing stocks reveals similar numbers.
Apple: 71.3 Percent EPS Growth
With 100,000 full-time employees, a market capitalization approaching $3 trillion, and earnings per share growing at 71.3 percent, Apple (Nasdaq: AAPL) is the dominant consumer electronics brand in the world today. Few other companies have enjoyed such unprecedented customer loyalty and widespread brand recognition.
Over the past five years, shares of Apple have appreciated by 366.3 percent, compared with 93.4 percent for the Standard & Poor’s 500 Index, significantly outperforming the broad market. AAPL shares pay a dividend currently yielding 0.52 percent annually.
While Apple grew its EPS by 71.3 percent from 2020 to 2021, as featured with Yahoo! Finance. A consensus of analyst firms who publish EPS estimates for the coming five years expects the smartphone maker to report numbers increasing by an average of 14.85 percent per year. The consensus recommendation offered by the same firms regarding AAPL shares is 1.8, where 1.0 is a strong buy and 5.0 is a sell.
The technology stalwart is expected to next report quarterly EPS and operating results between April 26 and May 2, 2022.
Alphabet: 89.7 Percent EPS Growth
After incorporating in 1998 and going public in 2004 with a stock price of $85 and market capitalization of $23 billion, as reported by Yahoo! Finance, Alphabet (Nasdaq: GOOG, GOOGL) is, by far, the world’s leading search and advertising company. Today, Alphabet boasts a market capitalization of $1.86 trillion.
From 2020 to 2021, Alphabet increased its EPS by 89.7 percent to $112.20. Alphabet’s GOOGL stock has returned 235.9 percent over the past five years. Alphabet currently pays no dividend.
Over the next five years, analyst firms surveyed by Yahoo! Finance expect Alphabet to increase its EPS by an average of 20 percent annually. The firms see Alphabet growing its EPS to $135.95 by the end of 2023 and rate Alphabet shares 1.7, where 1.0 is a strong buy and 5.0 is a sell.
The market is expecting Alphabet’s next earnings release between April 25 and 29, 2022.
Amazon: 52.0 Percent EPS Growth
For the 2021 fiscal year, Amazon (Nasdaq: AMZN) reported EPS of $64.81, up 52.0 percent from $42.64 for the 2020 fiscal year. The online retail giant’s $27.75 fourth-quarter EPS number beat consensus estimates by 677 percent. In early March, Amazon executives announced they would split AMZN shares 20-for-1 and buy back $10 billion worth of it.
AMZN shares have jumped close to 20 percent since news of the buyback and split was announced. Over the past five years, AMZN stock has returned 281.4 percent. The company pays no dividend.
The consensus among Wall Street analysts surveyed by Yahoo! Finance is for AMZN shares to climb to $4,098 and for EPS to grow by 34.8 percent annually for the coming five years. If AMZN shares hit the $4,098 target, it would represent a 25 percent gain from the current AMZN price.
Amazon is expected to report earnings between April 27 and May 2, 2022.
Tesla: 562.1 Percent EPS Growth
From 2020 to 2021, Tesla (Nasdaq: TSLA) increased its EPS from $0.74 to $4.90, or 562.1 percent. The world’s first company to mass produce electric cars reported fourth quarter EPS of $2.54, beating the street consensus estimate of $2.37 by 7.2 percent.
TSLA stock has returned 1,492.7 percent over the past five years compared with 120.4 percent for the Nasdaq Composite Index. Analysts give shares of the company led by CEO Elon Musk a price target of $949.22 and rate them a hold, as featured with Yahoo! Finance. Tesla is forecast to grow its EPS at a rate of 29.80 percent annualized over the coming five years.
Tesla management is scheduled to report first-quarter 2022 earnings between April 25 and 29.
NVIDIA: 120.0 Percent EPS Growth
Perhaps one of the most exciting technology companies in the world today, NVIDIA (Nasdaq: NVDA) produces highly sought-after graphics-processing cards and artificial-intelligence solutions. NVIDIA CEO Jensen Huang and his management team grew EPS by 120.0 percent from 2020 through 2021.
NVIDIA’s market capitalization now stands at $643.41 billion. NVDA shares have returned 884.6 percent over the past five years. Concerned with reinvesting profits back into growth, the technology leader pays a dividend currently yielding a paltry 0.06 percent.
For the coming five years, the Wall Street consensus is for NVIDIA to increase its EPS by an average of 30.74 percent each year. The consensus price target is $341.15. If reached, this target would represent a 23.3 percent increase from NVDA stock’s current level.
For the current 2023 fiscal year, NVIDIA is expected by analysts to increase revenues by 29.6 percent to $34.88 billion. Despite healthy growth with the California firm, a failed takeover of SoftBank’s Arm semiconductor giant has been seen depressing it, as featured with CNBC.
NVIDIA management’s next earnings report is scheduled for May 22, 2022.