Top growth stocks this month include Valvoline Inc., PPG Industries Inc., and Agilon Health Inc., all of which more than doubled their earnings in the most recent quarter. Growth stocks have rebounded from their 2022 lows, driven higher by the buzz around artificial intelligence and anticipation of an end to Federal Reserve rate hikes.

The Russell 3000 Growth Index, a benchmark for U.S. growth equities, has risen 11% in the past 12 months, compared with a 3% increase for the broader Russell 3000.

Below we look at the top growth stocks across three categories: fastest earnings-per-share (EPS) growth, fastest sales growth, and combined EPS and sales growth. The statistics in the tables below are as of May 31.

Top Growth Stocks by EPS Growth

These are the stocks with the highest year-over-year (YOY) EPS growth for the most recent quarter. Rising earnings show that a company’s business is growing and generating more money that it can reinvest or return to shareholders. Companies with quarterly EPS growth of more than 2,500% were excluded as outliers.

Top Growth Stocks by EPS Growth
  Price ($) Market Cap ($B) EPS Growth (%)
Valvoline Inc (VVV)     38.5   6.4 1480
PPG Industries Inc (PPG)   131.29   31 1288  
Agilon Health Inc (AGL) 19.88   8.2 1279

Source: YCharts

  • Valvoline Inc.: Valvoline offers automotive maintenance services across a network of 1,800 wholly-owned and franchised service locations. In the first three months of 2023, Valvoline completed the sales of its products business, making it a pure-play auto services company. In May, executives said they will use the proceeds from that sale to repurchase up to $1 billion worth of its common stock, representing over 15% of outstanding shares.
  • PPG Industries Inc.: PPG manufactures and sells paints, coatings, and other specialty materials for clients in a range of industries, including construction, consumer products, and industrials.
  • Agilon Health Inc.: Through partnerships and a purpose-built platform, Agilon enables senior patients to access a network of more than 2,700 primary care providers. In the first quarter of 2023, Agilon reported revenues of $1.14 billion compared to $653 million in the prior year, and net income of $16 million compared to $1 million a year ago.

Top Growth Stocks by Sales Growth

These are the stocks with the highest YOY sales growth for the most recent quarter. Rising sales can help investors identify companies that are able to grow revenue through organic or new methods, as well as find growing companies that have not yet reached profitability. In addition, accounting factors that may not reflect the overall strength of the business can significantly influence EPS.

However, sales growth can also be potentially misleading about the strength of a business because growing sales for money-losing businesses can be harmful if the companies have no plans to reach profitability. Companies with quarterly revenue growth of more than 2,500% were excluded as outliers.

Top Growth Stocks by Sales Growth
  Price ($) Market Cap ($B) Revenue Growth (%)
Vertex Energy Inc (VTNR) 6.47 0.5 827
Norwegian Cruise Line Holdings Ltd (NCLH) 14.85 6.3 249
Warner Bros. Discovery Inc (WBD) 11.28 27.5 239

Source: YCharts

  • Vertex Energy Inc.: Based in Houston, Vertex is an energy transition company that produces and distributes conventional and alternative fuels. In the first quarter of 2023, Vertex’s Mobile, Alabama refinery produced about 71,300 barrels per day, above guidance for 70,500. However, higher-margin products represented 62% of the production mix, down from 74% in the previous quarter, resulting in lower margins.
  • Norwegian Cruise Line Holdings Ltd.: Norwegian Cruise Line operates a fleet of 30 ships across 500 destinations worldwide; the company also has an additional seven ships scheduled for delivery through 2028. Coming out of COVID, Norwegian Cruise Line continues to ramp up its occupancy, with first-quarter numbers exceeding prior guidance. Moreover, pent-up demand has led to cumulative bookings in excess of pre-pandemic levels at higher prices.
  • Warner Bros. Discovery Inc.: Warner Bros. Discovery is a leading global entertainment and media company, with content available on TV, film, and streaming, across 220 countries and territories and 50 languages. In April, Warner Bros. Discovery introduced its new streaming service “Max,” an amalgamation of the company’s biggest brands including HBO, the DC universe, and HGTV.

Top Growth Stocks by EPS and Revenue

These are the top growth stocks as ranked by a growth model that scores companies based on a 50/50 weighting of their most recent quarterly YOY percentage revenue growth and most recent quarterly YOY EPS growth. Both sales and earnings are critical factors in the success of a company. 

Top Growth Stocks by EPS and Revenue
  Price ($) Market Cap ($B) Revenue Growth (%) EPS Growth (%)
Cal-Maine Foods Inc (CALM) 47.54   2.3 109 717
Shoals Technologies Group Inc (SHLS)   23.49   4 55 400
Albemarle Corp (ALB) 193.53   22.7 129 389

Source: YCharts

  • Cal-Maine Foods Inc.: Cal-Maine handles the production, packaging, marketing, and distribution of shell eggs for supermarkets, distributors, and consumers across the United States. A bird flu outbreak killed 43 million egg-laying hens last year, according to the USDA, causing U.S egg prices to double, rising to nearly $5 a dozen in January from less than $2 a year prior. Cal-Maine’s bottom line increased eightfold for the quarter ending Feb. 25.
  • Shoals Technologies Group Inc.: Shoals Technologies provides electrical balance of systems (EBOS) solutions for energy storage, solar, and EV infrastructure. Strong demand for solar products drove Shoals’ first-quarter revenue to $105 million, a 55% increase from the year prior. A higher-margin product mix increased gross margin by 84% during the same period.
  • Albermarle Corp.: Albermarle Corp. is a specialty chemical manufacturer, supplying products for the mobility, energy, connectivity, and healthcare industries. On May 22, Albermarle announced a strategic agreement with the Ford Motor Company (F), to deliver 100,000 metric tons of battery-grade lithium hydroxide for about 3 million future EV batteries.

Advantages of Growth Stocks

Exceptional Returns: Over the past decade, growth stocks have provided shareholders with eye-watering returns underpinned by historically low inflation and a healthy global economy. Although growth stocks experienced a correction in 2022, the Vanguard Growth Index Fund (VUG)—which holds stocks including iPhone maker Apple Inc. and Microsoft Corporation (MSFT)—still has an annualized return of 13% over the past 10 years.

These impressive returns highlight the power of growth stocks and the gains they can add to an investor’s portfolio.

Invest in What You Know: Many investors only feel comfortable investing in companies they know. Fortunately, popular growth stocks are often household names, giving would-be shareholders the chance to use their products and services before buying shares in these companies. Investors often only think of big technology names when they think of growth stocks, but the group also comprises well-known names in the consumer goods and services sectors, such as Visa Inc. (V) and T-Mobile US, Inc. (TMUS).

Risks of Growth Stocks

Volatility: Investing in growth stocks exposes investors to more extreme price swings, not only from negative company-specific news but also from broad market sell-offs. For example, the technology and consumer cyclical sectors led the stock market lower in the first half of 2022.

Before investing in a growth stock, investors can gauge its volatility by looking at beta—a measure comparing its volatility to the whole market. For instance, gaming chipmaker NVIDIA Corporation (NVDA) has a beta of 1.76, meaning that if the S&P 500 falls by 1%, NVIDIA will likely decline by 1.76%. Similarly, if the S&P 500 gains 1%, NVIDIA stock would be expected to rise by 1.76%.

Bubble Prone: Growth stocks can become overvalued as investors push prices to unsustainable levels based on sentiment rather than fundamentals. For instance, many growth internet stocks doubled and tripled in price in the late 1990s despite not generating any earnings. Rationalization arrived in the early 2000s, with the Nasdaq crashing roughly 80% from peak to trough.

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As of the date this article was written, the author does not own any of the above stocks.

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