10 companies with the fastest increases in sales per share


What does it mean when a company “beats” its consensus earnings-per-share estimate?

Absolutely nothing.

For one thing, net income, under generally accepted accounting principles (GAAP), can contain so many one-time items, an investor needs to dig into the earnings report to learn how well a company is really performing.

Earnings per share as a measure is most useful for longer periods or for stable and steady companies and industries. After all, management can manipulate EPS by altering the number of outstanding shares.

At the start of earnings season — the current one began five weeks ago — my colleague Jeff Reeves summed it up beautifully: “Weak earnings forecasts should be familiar to investors by now. And, besides, the game of moving the bar lower to ensure corporations can easily step over it is simply the way Wall Street works.”

Maybe that’s why 72% of companies that form the S&P 500
SPX,
+0.28%
 have beaten consensus earnings estimates, according to S&P Capital IQ analyst Lindsey Bell.

Rather than worrying about whether a company exceeds estimates, it’s more important to know if it’s increasing sales per share and if profitability is rising or falling.

Sales per share is important because it’s unaffected by most one-time items that can help or hurt earnings per share. Meanwhile, it takes into account the effect of dilution from stock issuance for any reason, as well as a decline in the share count brought about by stock buybacks.

A total of 412 of the companies included in the S&P 500 Index have reported results for fiscal quarters that ended between Jan. 18 and April 5 — essentially the “first quarter.”

Here are the 10 S&P 500 companies with the fastest increase in quarterly sales per share:

Company

Industry

Ticker

Sales per share – most recent quarter

Sales per share – year earlier

Growth of sales per share

H&R Block Inc.

Consumer Services

HRB,
-0.19%
$1.85

$0.73

154%

Avago Technologies Ltd.

Semiconductors

AVGO,
-0.26%
$5.88

$2.78

112%

Gilead Sciences Inc.

Biotechnology

GILD,
+0.65%
$4.84

$2.99

62%

Skyworks Solutions Inc.

Semiconductors

SWKS,
+0.89%
$3.90

$2.50

56%

D.R. Horton Inc.

Homebuilding

DHI,
-0.37%
$6.49

$4.74

37%

Alliance Data Systems Corp.

Data Processing Services

ADS,
-0.62%
$25.18

$18.66

35%

Apple Inc.

Computer and Telecom. hardware

AAPL,
+0.75%
$9.94

$7.39

34%

Goldman Sachs Group Inc.

Investment Banks/ Brokers

GS,
+0.20%
$25.48

$19.37

31%

Facebook Inc. Class A

Internet Software/ Services

FB,
-1.77%
$1.25

$0.96

30%

Plum Creek Timber Co. Inc.

Timberland

US:PCL
 

$2.30

$1.79

29%

Source: FactSet

It may surprise you to see tax preparer H&R Block Inc.
HRB,
-0.19%
 at the top of the list, with sales per share for its fiscal third quarter ended Jan. 31 rising 154% from a year earlier. The company said revenue rose to $509 million from $200 million a year earlier because of “an earlier opening of the Internal Revenue Service’s (IRS) e-file system this tax season.”

In other words, a lot of revenue H&R Block would have normally booked during its fiscal fourth quarter — the heart of tax season — was shifted to the third quarter. So you can expect the year-over-year comparison to look pretty ugly next quarter.

H&R Block is also the only company among the 10 listed that was unprofitable in its most recently reported quarter, with a loss of $35.4 million, or 13 cents a share.

Avago Technologies Ltd.
AVGO,
-0.26%
 is next, with sales per share for its fiscal first quarter ended Feb. 1 jumping 112% as wireless revenue soared 90%. The results reflected the acquisitions of LIS Corp. and PLX Technology Inc. The company’s gross margin improved to 59% from 52%. Avago provided guidance, saying it expected second-quarter revenue to be little changed from the first quarter at roughly $1.64 billion. That would be an increase of 131% from a year earlier.

Gilead Sciences Inc.
GILD,
+0.65%
ranks third, with quarterly revenue per share gaining 62%, mainly from $3.58 billion in sales for hepatitis C medication Harvoni, which was approved for use in the U.S. and Europe in the fourth quarter. Sales for Harvoni were offset by a 57% decline in Gilead’s older and much more expensive hepatitis C drug, Sovaldi.

Here’s a look at how well those companies have increased sales per share for the most recent 12-month periods, from a year earlier:

Company

Ticker

Sales per share – pas 12 months

Sales per share – year earlier

Growth of sales per share

H&R Block Inc.

HRB,
-0.19%
$12.14

$11.02

10%

Avago Technologies Ltd.

AVGO,
-0.26%
$18.69

$15.69

19%

Gilead Sciences Inc.

GILD,
+0.65%
$17.53

$15.61

12%

Skyworks Solutions Inc.

SWKS,
+0.89%
$14.72

$13.35

10%

D.R. Horton Inc.

DHI,
-0.37%
$25.23

$23.52

7%

Alliance Data Systems Corp.

ADS,
-0.62%
$89.17

$86.79

3%

Apple Inc.

AAPL,
+0.75%
$36.31

$33.90

7%

Goldman Sachs Group Inc.

GS,
+0.20%
$78.43

$73.16

7%

Facebook Inc. Class A

FB,
-1.77%
$4.76

$4.43

8%

Plum Creek Timber Co. Inc.

US:PCL
 

$8.88

$8.38

6%

Source: FactSet

The next page includes sales growth estimates for the full year, as well as valuation ratios.

Looking ahead

There is, of course, no way to predict which companies will grow their revenue the most over the next year, so we’ll use sell-side analysts’ numbers (though i’d rather not).

The following table includes expected sales-growth rates for the current fiscal year, as well as price-to-earnings ratios and PEG ratios:

Company

Ticker

Expected sales growth – fiscal 2015

Price/ consensus 2015 EPS estimate

PEG ratio

H&R Block Inc.

HRB,
-0.19%
4%

15.0

1.25

Avago Technologies Ltd.

AVGO,
-0.26%
59%

14.4

0.72

Gilead Sciences Inc.

GILD,
+0.65%
20%

10.0

1.49

Skyworks Solutions Inc.

SWKS,
+0.89%
41%

19.4

0.89

D.R. Horton Inc.

DHI,
-0.37%
28%

13.6

0.89

Alliance Data Systems Corp.

ADS,
-0.62%
24%

20.1

1.21

Apple Inc.

AAPL,
+0.75%
26%

14.4

0.90

Goldman Sachs Group Inc.

GS,
+0.20%
3%

10.5

1.31

Facebook Inc. Class A

FB,
-1.77%
37%

39.3

0.93

Plum Creek Timber Co. Inc.

US:PCL
 

1%

37.4

2.95

Source: FactSet

It’s impressive to see seven of 10 of those companies expected to generate double-digit sales growth for fiscal 2015. And it’s interesting that six trade at price-to-earnings ratios that are lower than the weighted aggregate for the S&P 500 Index. The index trades for 17.8 times consensus 2015 EPS estimates.

The PEG ratio is price-to-earnings-to-expected-EPS growth. The forward PEG is calculated by dividing the forward P/E by FactSet’s “long-term growth estimate for three to five years,” which is based on consensus EPS estimates. A PEG ratio below 1 could mean a company is undervalued because investors aren’t fully taking into account its growth potential.

Avago, D.R. Horton Inc.
DHI,
-0.37%
 and Apple Inc.
AAPL,
+0.75%
 look especially ripe, with relatively low P/E ratios, strong expected sales-growth rates and low PEG ratios.

Using a few set of numbers can’t be a basis to make a sound investment decision. You must do your own research to understand a company’s long-term strategy and then decide whether you’re still a believer and can stay committed for several years.


View more information: https://www.marketwatch.com/story/10-companies-with-the-fastest-increases-in-sales-per-share-2015-05-06

Articles in category: moneyist
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