Rising earnings push share prices higher.
The S&P 500 Index’s annual earnings growth averaged about 9.4% every year over the past five years, creating a nearly 55% increase in its price to close at $2,919.40 per share on Wednesday.
Past performance is not a guarantee of future results. However, if you pick stocks that have outperformed the S&P 500 Index in terms of a higher average annual earnings growth rate in the past five years, your search may uncover companies that will continue to produce strong performances, eventually beating the market.
This search suggests that earnings per share without non-recurring items as the inclusion of one-time entries, such as infrequent or unexpected gains or losses in the income statement of the company, may influence results.
Here are some findings of my search. These stocks are mid-caps.
Netflix
Netflix Inc. (NFLX, Financial) has grown its trailing 12-month earnings per share without non-recurring items by 10.2% per annum over the past five years, as illustrated in the chart below.
The Los Gatos, California-based provider of internet entertainment services closed at $267.53 per share on Wednesday for a market capitalization of $117.13 billion.
The stock was flat so far this year and it underperformed the Nasdaq by 19.2%.
The company has a price-earnings ratio of 104.91 versus the industry median of 15.85 and a price-sales ratio of 6.88 compared to the industry median of 1.43.
Netflix does not pay a dividend.
Wall Street recommends an overweight rating for shares of Netflix with an average target price of $388.11.
Crown Castle International
Crown Castle International Corp. (CCI, Financial) has grown earnings per share without non-recurring items by 15.4% on average every year over the past five years, as it is shown in the chart below.
The Houston-based provider of infrastructure for shared communications closed at $137.25 per share on Wednesday for a market capitalization of $57.06 billion.
The stock has risen 26.4% so far this year, outperforming the S&P 500 by almost 10%.
The company has a price-earnings ratio of 79.33 versus the industry median of 17.05 and a price-sales ratio of 10.03 versus the industry median of 7.83.
Crown Castle is returning part of its cumulative earnings to the shareholders in the form of dividends paid. The company has distributed quarterly dividends since March 31, 2014.
On Sept. 30, the company paid a quarterly dividend of $1.125 per common share, producing a 3.28% forward dividend yield versus the S&P 500’s yield of 1.96%. Yields are as of Oct. 9.
Wall Street issued an overweight recommendation rating for shares of Crown Castle with an average target price of $138.
First Horizon National
First Horizon National Corp. (FHN, Financial) has recorded 25.5% annual growth for its trailing 12-month earnings per share without non-recurring items over the past five years, as illustrated in the chart below.
The Memphis, Tennessee-based regional bank closed at $15.54 per share on Wednesday for a market capitalization of $4.86 billion.
The stock has gained 18% so far this year, outperforming the S&P 500 index by 1.6%.
The stock has a price-earnings ratio of 8.72 versus the industry median of 11.39 and a price-sales ratio of 2.57 compared to the industry median of 2.82.
First Horizon National rewards its shareholders with a portion of its earnings paid in the form of dividends. The company has distributed quarterly dividends since January 1985.
On Oct. 1, First Horizon paid a quarterly dividend of 14 cents per common share, producing a 3.59% forward dividend yield versus the S&P 500’s yield of 1.96%. Yields are as of Oct. 9.
Wall Street issued an overweight rating for shares of First Horizon National with an average target price of $17.81.
Disclosure: I have no positions in any securities mentioned in this article.
Read more here:
- 3 Long-Term Payers Declare Quarterly Dividends
- These Stocks Will Increase the Quality of a Portfolio
- These Large Caps Offer High Earnings Yields
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