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S&P 500: Earnings of 6 cheap stocks about to rise 50% or more

You don’t have to pay a fortune for S&P 500 stocks with rising earnings. If you look closely, you will also find value-priced stocks in growth mode.


Six companies in the S&P 500 Pure Value Index, including US airlines (AAL), United Airlines (UAL) and Allstate (ALL), are all poised to increase earnings by 50% or much more this year, says an Investor’s Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith.

And that says something. This means they’re growing much faster than the rest of the S&P 500. Analysts expect the S&P 500’s operating profit to rise just 0.8% this year, says FactSet.

Looking for value in the S&P 500

If there’s one trend in the S&P 500, it’s that investors are willing to pay for growth. That’s almost obvious any way you look at it.

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The SPDR Portfolio S&P 500 Growth ETF (SPYG) is up nearly 20% this year. That far exceeds the 16.2% of the S&P 500. But it wipes out the 11.1% gain of the SPDR Portfolio S&P 500 Value ETFs (SPYV).

Meanwhile, investors’ preference for expensive growth stocks is very clear when you look at the S&P 500. The top 10 performing S&P 500 stocks have an average price-to-earnings ratio of 174 times trailing earnings. Investors just want to own stocks like Nvidia (NVDA), is expected to increase earnings by 138% this fiscal year ending in January, regardless of price.

But it turns out you can also find earnings growth in cheaper S&P 500 stocks.

S&P 500 earnings growth on a budget

If you’re looking for a cheap stock with fast-growing earnings, look to the sky. That’s a trait common to many airline stocks. Five of the six value stocks that will post massive earnings growth this year are all airlines.

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Take American Airlines for example. The carrier’s adjusted earnings are expected to rise 565% this calendar year to $3.33 per share. That’s several times more growth than Nvidia. But guess what? While shares are up 22% year to date, they still trade for less than 4.2 times trailing earnings. That makes American one of the cheapest stocks in the S&P 500, while still being one of the fastest growing stocks.

It’s a similar story with rival United Airlines. The S&P 500 Pure Value index member trades for just 6.5 times trailing earnings. And yet it is expected to increase earnings by 339% this year.

And it’s not just an airline thing. Analysts think insurer Allstate is poised to post 151.9% adjusted earnings growth in 2023. Let alone that the stock is down 22% and is a permanent fixture in the value portion of the S&P 500.

Savvy investors know not to fixate on P/E ratios and valuations. But they also know how to track companies that show profit growth. And in some cases you can find both.

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S&P 500 Value stocks are growing earnings like crazy

Company Ticker Inventory YTD % ch. EPS ch. estimated 2023
US airlines (AAL) 22.2% 565.2%
United Airlines (UAL) 36.9 338.5
Allstate (ALL) -22.4 151.9
Delta Airlines (VALLEY) 31.6 109.8
Southwest airlines (LUV) -1.8 86.8
Alaska Air group (ALK) 6.0 50.5
Sources: S&P Global Market Intelligence, IBD
Follow Matt Krantz on Twitter (X) @mattkrantz

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