The four companies listed below have been upgrading their operating activities in recent years, as shown by a substantial increase in the allocation of funds to the purchase of fixed assets such as property, plant and equipment. This could mean the managers of these companies expect a higher demand for the goods and services they produce, which would ideally correspond to higher revenue.
Wall Street sell-side analysts are also optimistic about these stocks, as they have issued positive recommendation ratings for each of them.
Tencent Holdings
The first company that makes the cut is Tencent Holdings Ltd. (TCTZF, Financial), a Chinese multinational conglomerate that holds several subsidiaries that specialize in a broad range of internet-related services and products as well as artificial intelligence and technology.
Tencent’s purchases of property, plant and equipment have grown at an average annual rate of approximately 45.41% over the past five years, from $1.21 billion in 2016 to $5.22 billion in 2020.
Morningstar analysts estimate total sales will grow at a compound annual rate of 13.3% over the next several years to reach $128.3 billion by 2024.
On Wall Street, the stock has a median recommendation rating of buy with an average price target of approximately $74.91 per share.
The stock traded at $54.38 per share at close on Tuesday for a market capitalization of $530.20 billion. The share price is down almost 40% over the past year, yielding a price-book ratio of 3.91 versus the industry median of 2.88.
The high price-book ratio may suggest the stock is not cheap. However, as of the time of writing, Tencent’s weighted average cost of capital is 8.01%, while its return on invested capital is 9.99% (calculated using trailing 12-month financial statement data). This means the company is creating value for shareholders.
American Tower
The second company that meets the criteria is American Tower Corp. (AMT, Financial), a Boston-based specialty real estate investment trust holding a portfolio of more than 180,000 communications sites.
American Tower's purchases of real estate, plant and equipment (consisting of real estate asset acquisitions) have grown at a compound annual rate of approximately 15% over the past five years, from $803.6 million in 2017 to $1.38 billion in 2021.
Morningstar analysts estimate total sales will grow at an average rate of about 6.22% per year over the next few years, reaching $11.67 billion by 2024.
On Wall Street, the stock has a median recommendation rating of overweight with an average price target of $288.88 per share.
The stock closed at $228.55 on Tuesday for a market capitalization of $104.19 billion following a 12.64% increase over the past year. The price-book ratio is 20.50 versus the industry median of 102.
The price-book ratio may suggest the stock is not cheap. However, as of the time of writing, American Tower's WACC is 3.86%, while its ROIC is 5.31%. This means the company creates value for shareholders.
Intuitive Surgical
The third company that qualifies is Intuitive Surgical Inc. (ISRG, Financial), a Sunnyvale, California-based designer, manufacturer and marketer of the da Vinci surgical system and other medical instruments and accessories.
Intuitive Surgical's purchases of property, plant and equipment have grown at an average annual rate of approximately 27.3% over the past five years, from $190.7 million in 2017 to $353.5 million in 2021.
Morningstar analysts estimate total revenue will grow about 15.5% annually over the next several years, reaching about $8.5 billion by 2024.
On Wall Street, the stock has a median recommendation rating of overweight with an average price target of $339.50 per share.
Shares were trading at $291.55 at close on Tuesday for a market capitalization of $104.30 billion thanks to a 20.29% increase that occurred over the past year. The price-book ratio is 8.75 versus the industry median of 3.25.
The price-book ratio may suggest the stock is not cheap. As of the time of writing, however, Intuitive Surgical's WACC is 8%, while the ROIC is 22.5%. This means the company creates value for shareholders.
Dassault Systemes
The fourth company that makes the cut is Dassault Systemes SE (DASTF, Financial), a French global provider of software solutions and services.
Dassault Systemes' purchases of property, plant and equipment have grown at an average annual rate of approximately 15.8% over the past five years, from $77.7 million in 2017 to $118 million in 2021.
Morningstar analysts estimate total revenue will grow about 9.2% annually over the next several years to reach about $7.2 billion by 2024.
On Wall Street, the stock has a median recommendation rating of overweight with an average price target of $50.05 per share.
The stock was trading at $46.65 per share at Tuesday's close, giving it a market cap of $63.31 billion thanks to a 10% gain over the past year. The price-book ratio is 9.45 versus the industry median of 3.13.
The price-book ratio may suggest the stock is not cheap. As of the time of writing, though, Dassault’s WACC is 3%, while its ROIC is 6.84%. This means the company is creating value for shareholders.
