Stocks in the S&P 500 Index (SPX) with the fastest expected revenue growth are poised to deliver market-beating performance in 2019. They are "positioned to use top-line revenue generation instead of margins to drive bottom-line earnings," per a recent report from Goldman Sachs.
Goldman's basket of 50 stocks with the fastest-growing revenues has dramatically outperformed the S&P 500 at the start of this year, rising by 10.7% as of Goldman's January 28 report. We will look at seven of these stocks: Assurant Inc. (AIZ), Charles Schwab Corp. (SCHW), Ulta Beauty Inc. (ULTA), Monster Beverage (MNST), Costco Wholesale (COST), Adobe Inc. (ADBE), and PayPal Holdings Inc. (PYPL).
7 Fast Growth Stocks
(Projected 2019 Sales Growth)
- Assurant: 20%
- Schwab: 11%
- Ulta Beauty: 12%
- Monster Beverage: 10%
- Costco: 8%
- Adobe: 26%
- PayPal: 17%
- S&P 500 median stock: 5%
Source: Goldman Sachs
Significance For Investors
Goldman based its analysis of projected revenue growth rates in 2019 on consensus estimates from stock analysts. The median stock in Goldman's high revenue growth basket is projected to deliver an 11% sales increase in 2019, versus 5% for the median S&P 500 stock. Given that earnings typically follow sales, the median stock in the basket is expected to deliver 12% EPS growth in 2019, compared to 8% for the median S&P 500 stock, per Goldman's exhaustive report called "Anatomy of our US Portfolio Strategy Thematic and Sector Baskets."
The basket has representatives from all 11 sectors in the S&P 500. Insurance company Assurant and securities brokerage firm Schwab are in the financial services sector. Beauty products retailer Ulta is in consumer discretionary, while energy drink maker Monster and membership warehouse retailer Costco are in consumer staples. Software developer Adobe and payments processor PayPal are members of the information technology sector.
The projected 2019 EPS growth rates for the seven highlighted stocks are: 11% for Costco, 12% for Monster, 16% for Adobe, 17% for Schwab and Ulta Beauty, 20% for PayPal, 45% for Assurant.
Assurant, the fastest-growing of the 7 stocks, has three main lines of business. Its Global Housing segment offers insurance for homes and rental apartments, protecting lenders and building owners. The Global Lifestyle segment underwrites warranties, service, and repair contracts that are offered by sellers of mobile devices, consumer electronics, appliances, and vehicles. And the Global Preneed segment sells prepayment options for funeral expenses.
Analysts' price targets on Assurant stock anticipate 12-month gains ranging from 23% to 35%, but this is based on a small sample of only four analysts, per CNN. Meanwhile, Assurant also is among the 65 most-shorted stocks in the S&P 500, which may reflect a combination of investor skepticism about Assurant and hedging against long positions in other stocks, per Market News Video.
PayPal, a leading processor of online payments, is seeing strong growth in Venmo, a digital wallet and mobile payment service that caters to the rapidly expanding person-to-person (P2P) payments market, Briefing.com reports.
Given rising cost pressures from tariffs and increased wages, companies with the fastest revenue growth may be in the best position to expand their earnings and stock prices. However, a slowing economy could represent a potentially significant challenge even to these stocks.