Rising earnings can often drive share prices higher. The S&P 500 Index, which is one of the most used benchmarks for the U.S. market, has grown its annual earnings per share (not adjusted for inflation) by about 6.5% every year over the past five years.
As a result, the share price of the benchmark increased by 20.4% over the past five years (it closed at $2,488.65 on April 3) and gained more than 40% until the effects from the coronavirus epidemic started to impact the market.
Past performance is not a guarantee of future results, but it does suggest when a business has or doesn’t have a good foundation on which to grow.
Thus, investors may want to consider Republic Services Inc. (RSG, Financial), Clorox Co. (CLX, Financial) and Chesapeake Utilities Corp. (CPK, Financial), as these companies have five-year earnings per share without non-recurring items growth rate of more than 6.5%.
Republic Services
The Phoenix-based waste management company grew its trailing 12-month earnings per share without non-recurring items by a yearly average of 18.1% over the past five full fiscal years. The share price of $72.53 at close on Friday is a result of a nearly 90% rise over the past five years.
The stock has a market capitalization of $23.15 billion, a price-earnings ratio of 21.78 versus the industry median of 16.1 and a price-sales ratio of 2.26 versus the industry median of 1.01.
Wall Street recommends an overweight rating for this stock with an average price target of $92.50 per share. The overweight rating means that the stock is projected to outperform.
GuruFocus assigned a moderate rating of 4 out of 10 for the company’s financial strength and a high rating of 8 out of 10 for its profitability.
Clorox
The Oakland, California-based manufacturer and marketer of household, personal and professional products grew its trailing 12-month earnings per share without NRI by an annual average of 8.5% over the past five years. The closing price of $177.54 on April 3 is a result of a 57.2% increase over the past five years.
The stock has a market capitalization of $22.21 billion, a price-earnings ratio of 27.87 versus the industry median of 16.6 and a price-sales ratio of 3.7 compared to the industry median of 0.74.
Wall Street issued a hold rating for the stock with an average price target of $170.92 per share.
GuruFocus assigned the company a moderate financial strength rating of 5 out of 10 and a high profitability rating of 8 out of 10.
Chesapeake Utilities
The Dover, Delaware-based utility company grew its trailing 12-month earnings per share without NRI by an annual average of 9% over the past five full fiscal years. On the tailwind of this, the share price ($78.75 at close on April 3) rose by about 53% over the past five years.
The stock has a market capitalization of $1.29 billion, a price-earnings ratio of 19.92 compared to the industry median of 14.55 and a price-sales ratio of 2.22 versus the industry median of 1.15.
Wall Street recommends an overweight rating for this stock with an average price target of $102 per share.
GuruFocus assigned a low score of 3 out of 10 to the company’s financial strength, but a high score of 8 out of 10 to the company’s profitability.
Disclosure: I have no positions in any securities mentioned in this article.
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