These companies may attract the interest of investors because they have increased their capital spending significantly over the past five years. Such spending suggests that these companies likely have expectations for higher demand for their products and/or services, which would in turn produce higher sales.
Thus, investors may want to consider the following stocks as they are expected to post higher-than-average earnings per share (EPS) over the next five years following years of massive allocation of funds to capital spending for business growth.
Alibaba Group Holding
The first company that meets the above-listed criteria is Alibaba Group Holding Ltd (BABA, Financial), a Chinese internet retail giant.
Alibaba has grown its capital spending enormously over the past five years, making investments in fixed assets of $5.3 billion in full-year 2019 compared to $242 million in 2014.
Wall Street analysts forecast that Alibaba’s EPS will increase by 24.62% on average every year over the next five years versus 6% for the S&P 500 index.
The stock has a market capitalization of $523.99 billion, a price-earnings ratio of 20.25 versus the industry median of 12.16, a price-book ratio of 4.76 compared to the industry median of 0.96 and a price-sales ratio of 7.08 compared to the industry median of 0.39.
Year to date, the stock lost 8%, closing at a price of $195.32 per share on Thursday.
As of March, 18 sell-side analysts recommend a strong buy rating, 29 recommend a buy rating and one recommends a hold rating. The average target price is 1,813.92 Chinese yuan ($255.85) per share.
Neurocrine Biosciences
The second company that meets the above-listed criteria is Neurocrine Biosciences Inc (NBIX, Financial), a San Diego, California-based biotech researcher and developer of therapies for patients with endocrine, neurological and psychiatric disorders.
Neurocrine Biosciences has grown its capital spending a lot over the past five years, from $1.61 million in full-year 2014 to $14.75 million in full-year 2019.
Wall Street sell-side analysts estimate that Neurocrine Biosciences’ EPS will increase by 171.22% on average every year over the next five years.
The stock has a market capitalization of $8.44 billion, a price-earnings ratio of 277.15 compared to the industry median of 31.47, a price-book ratio of 13.23 versus the industry median of 2.78 and a price-sales ratio of 11.05 versus the industry median of 8.56.
Year to date, the stock has fallen 14% and closed at a price of $92.52 per share on Thursday.
As of March, five sell-side analysts recommend a strong buy rating and eight recommend a buy rating. The average target price is $120.70 per share.
Mitek Systems
The third company that meets the above-listed criteria is Mitek Systems Inc (MITK, Financial), a San Diego, California-based developer and seller of mobile image capture and digital identity verification solutions in the U.S. and internationally.
Mitek Systems has increased its capital spending dramatically over the past five years, investing $1.06 million in full-year 2019 compared to $135,452 in full-year 2014.
Wall Street sell-side analysts expect that Mitek Systems’ EPS will grow by 15% on average every year over the next five years.
The stock has a market capitalization of $332.12 million, a price-earnings ratio of 116 versus the industry median of 17.76, a price-book ratio of 2.98 versus the industry median of 2.05 and a price-sales ratio of 3.67 compared to the industry median of 1.53.
Year to date, the share price of Mitek Systems Inc gained 6% to $8.12 at close on Thursday.
As of March, four sell-side analysts recommend a buy rating and one recommends holding this stock. The average target price is $10.63 per share.
Disclosure: I have no positions in any securities mentioned.
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