Do you want to pick stocks that carry a high potential to continue to drive their share prices higher? Then you may need to choose those stocks that grow their earnings at a faster pace than the market.
The S&P 500 index, which is the benchmark for U.S.-listed stocks, has grown its earnings by 41% over the past five years through June 30, making the share price rise 55.5% to $3,112.76 at close on Wednesday.
Past performance cannot be taken as a pledge of future results, but it works as a good evaluator of which businesses have been doing things right. Investors may be interested in the following securities that have topped the S&P 500 in terms of higher cumulative earnings growth over the past five years.
The selected stocks have been compared with the index on earnings per share without non-recurring items.
T-Mobile US
T-Mobile US Inc. (TMUS, Financial) has grown its trailing 12-month earnings per share without non-recurring items by 137.8% over the past five years, as illustrated in the chart below, pushing the share price up 175% to $78.34 at close on Wednesday, topping the S&P 500 by 119.5%.
The Bellevue, Washington-based provider of mobile communications services in the United States, U.S. Virgin Islands and Puerto Rico has a market capitalization of $67 billion, a price-earnings ratio of 19.99 versus the industry median of 18.83 and a price-sales ratio of 1.52 compared to the industry median of 1.41.
Wall Street issued a recommendation rating of 1.9, which belongs to the subrange of 1 (Strong Buy) to 2 (Buy), and set an average target share price of $89.
Tactile Systems Technology
Tactile Systems Technology Inc. (TCMD, Financial) has grown its trailing 12-month earnings per share without non-recurring items by 97.2% over the past five years, as shown in the chart below. Over the same period of time, the share price has risen 459.2%, topping the S&P 500 index by 404.5%. The stock closed at a price of $62.95 per share on Wednesday.
The Minneapolis, Minnesota-based developer of medical devices for the treatment of chronic patients has a market capitalization of approximately $1.2 billion, a price-earnings ratio of 136.84 versus the industry median of 30.68 and a price-sales ratio of 6.88 versus the industry median of 3.47.
Wall Street issued a buy recommendation rating for shares of Tactile Systems Technology with an average target price of $77.80.
TriNet Group
TriNet Group Inc. (TNET, Financial) has increased its trailing 12-month earnings per share without non-recurring items by 82.8% over the past five years, as illustrated in the chart below, driving an 81% rise in the share price, which topped the S&P 500 index by 26.5%. The share price traded at $53.89 at close on Wednesday for a market capitalization of roughly $3.78 billion.
The Dublin, California-based provider of staffing and employment services to small and midsize companies in North America has a price-earnings ratio of 20.07 versus the industry median of 17.42 and a price-sales ratio of 1.03 compared to the industry median of 0.95.
Wall Street issued an overweight rating for shares of TriNet Group Inc with an average target price of $71.75.
Disclosure: I have no positions in any securities mentioned in this article.
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