Stocks that outperform the market usually share key traits such as rising sales, expanding margins, and increasing returns on capital. The select few that can do all three for many years are often the ones that make you life-changing money.
It’s clear there’s a strong connection between sustained earnings growth and hall-of-fame returns. Keeping that in mind, here are three market-beating stocks with room for further growth.
Flowserve (FLS)
Five-Year Return: +101%
Manufacturing the largest pump ever built for nuclear power generation, Flowserve (NYSE:FLS) manufactures and sells flow control equipment for various industries.
Why Do We Like FLS?
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Operating profits increased over the last five years as the company gained some leverage on its fixed costs and became more efficient
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Share buybacks catapulted its annual earnings per share growth to 23.7%, which outperformed its revenue gains over the last two years
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Free cash flow margin jumped by 7.3 percentage points over the last five years, giving the company more resources to pursue growth initiatives, repurchase shares, or pay dividends
Flowserve’s stock price of $72.85 implies a valuation ratio of 17.2x forward P/E. Is now a good time to buy? See for yourself in our in-depth research report, it’s free.
Super Micro (SMCI)
Five-Year Return: +903%
Founded in Silicon Valley in 1993 and known for its modular “building block” approach to server design, Super Micro Computer (NASDAQ:SMCI) designs and manufactures high-performance, energy-efficient server and storage systems for data centers, cloud computing, AI, and edge computing applications.
Why Should You Buy SMCI?
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Annual revenue growth of 61.4% over the last two years was superb and indicates its market share increased during this cycle
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Enormous revenue base of $39.06 billion provides significant distribution advantages
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Earnings per share grew by 27.8% annually over the last two years, massively outpacing its peers
At $37.23 per share, Super Micro trades at 8.9x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
NMI Holdings (NMIH)
Five-Year Return: +98.3%
Founded in the aftermath of the 2008 housing crisis to bring new capacity to the mortgage insurance market, NMI Holdings (NASDAQ:NMIH) provides mortgage insurance that protects lenders against losses when homebuyers default on their mortgage loans.
Why Are We Positive on NMIH?
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Pre-tax profit margin improvement of 13.8 percentage points over the last five years demonstrates its ability to scale efficiently
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Annual book value per share growth of 16.1% over the last five years was superb and indicates its capital strength increased during this cycle
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ROE punches in at 17.3%, illustrating management’s expertise in identifying profitable investments
