These companies have allocated higher funds to capital expenditures (aka CapEx) over the past several years. When a company allocates higher reserves of liquidity to carry out new projects or make investments to grow the business, it means that that company expects it has to fulfill higher demand levels, which will likely translate into higher sales.
Provided that the funds are used in an efficient and effective manner, higher sales ideally lead to higher earnings, producing a positive impact on the share prices.
Thus, investors should consider the following three stocks, as their bottom lines are expected to improve following years of massive allocation of cash to capital growth.
Rexford Industrial
Rexford Industrial Realty Inc (REXR, Financial) is a Los Angeles, California-based real estate investment trust that focuses on owning and operating industrial properties through the whole of infill markets in Southern California.
The company has grown its capital spending over the past five years by 315.2% to $58 million as of the most recent full fiscal year.
Wall Street analysts forecast Rexford Industrial’s net earnings will increase by 22.9% in 2020 and 10% every year over the next five years.
The stock has an overweight recommendation rating with an average target price of $50.71 per share versus Friday’s closing share price of $49.66.
The share price has risen 42% in the past year to trade above the 200-, 100- and 50-day simple moving average lines.
The stock has a market capitalization of $5.51 billion, a price-earnings ratio of 118.24 compared to the industry median of 18.4, a price-book ratio of 2.53 versus the industry median of 1.2 and a price-sales ratio of 20.36 versus the industry median of 8.01.
Ebix
Ebix Inc (EBIX, Financial) is a Johns Creek, Georgia-based provider of software and e-commerce solutions to e-learning, healthcare, insurance and financial companies.
The company has grown its capital spending by 61.7% in the past three years to $16.1 million as of the most recent full fiscal year.
Wall Street analysts estimate that Ebix will see its net earnings grow by 28.8% in 2020 and 10% per year over the following five years.
The stock has an overweight recommendation rating with an average target price of $78 per share versus Friday’s closing price of $37.02.
The share price fell 34% in the past year. Following this downtrend, the share price still trades above the 100- and 50-day simple moving average lines. It is below the 200-day SMA line.
The stock has a market capitalization of $1.13 billion, a price-earnings ratio of 13.61 versus the industry median of 25.99, a price-book ratio of 2.11 compared to the industry median of 2.93 and a price-sales ratio of 2 versus the industry median of 2.25.
M.D.C.
M.D.C. Holdings Inc (MDC, Financial) is a Denver, Colorado-based homebuilding company.
The company has increased its capital spending over the past over years passing from $1.5 million in full-year 2015 to $24.7 million in full-year 2019.
Wall Street analysts expect net earnings to grow by 15.1% in 2020 and by 8.5% every year over the following five years.
The stock has a hold recommendation rating and an average price target of $46.42 per share compared to Friday’s closing price of $44.7.
The share price has risen 59% in the past year to trade above the 200-, 100- and 50-day simple moving average lines.
The stock has a market capitalization of $2.8 billion, a price-earnings ratio of 12.05 versus the industry median of 10.98, a price-book ratio of 1.57 compared to the industry median of 1.31 and a price-sales ratio of 0.87 versus the industry median of 0.78.
Disclosure: I have no positions in any security mentioned.
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