Investors may want to take a look at the following securities, as they represent companies that have significantly increased allocations to their capital expenditures in the past five years.
Capital expenditures (aka CapEx) are funds that a company usually uses to develop new projects or make investments to grow the business. When a company feels the need to do that, it means that its management board expects higher levels of demand. As long as the money is utilized efficiently and effectively, net earnings will likely follow higher sales, producing positive repercussions on the share prices.
Here are some results of my search for stocks whose sales and earnings are expected to grow following five years of significant CapEx growth.
Argan Inc
The first company that meets the above-listed criteria is Argan Inc (AGX, Financial), a Rockville, Maryland-based provider of engineering, construction and consulting services to energy companies.
The company has implemented a capital spending growth rate of 657% over the past five years, increasing the allocation of funds to the purchase of fixed assets to $8.6 million in the full fiscal year 2019 from $1.14 million in the full fiscal year 2014.
Wall Street analysts forecast that Argan will grow the net earnings per share (aka EPS) by 192.7% (versus 16% for the S&P 500) next year and 10% on average every year over the next five years (versus 7% for the S&P 500).
As of March, Wall Street sell-side analysts released one buy and two hold ratings. The average target price is $53 per share versus Wednesday’s closing price of $37.92.
Year-to-date the share price has fallen 22% to below the 200-, 100- and 50-day simple moving average lines.
The stock has a market capitalization of $592.82 million, a price-book ratio of 1.7 versus the industry median of 0.85 and a price-sales ratio of 2.3 versus the industry median of 0.47.
Forrester Research
The second company that meets the above-listed criteria is Forrester Research Inc (FORR, Financial), a Cambridge, Massachusetts-based operator of an independent research, data and advisory services company in North America and internationally.
Over the past five years, this company’s capital spending to purchase fixed assets has increased by 693% to nearly $12 million as of the full fiscal year 2019, up from $1.5 million as of the full fiscal year 2014.
Wall Street sell-side analysts forecast that Forrester Research will grow the EPS by 19.1% next year (versus 16% rate of the S&P 500) and 12% on average every year over the next five years (versus 7% rate of the S&P 500).
As of March, Wall Street sell-side analysts recommend an overweight rating with an average target price of $53.50 per share versus Wednesday’s closing price of $24.07.
The share price has dropped 51% so far this year, and now it trades below the 200-, 100- and 50-day simple moving average lines.
The stock has a market capitalization of $451.43 million, a price-book ratio of 2.84 versus the industry median of 1.42 and a price-sales ratio of 0.97 versus the industry median of 0.77.
Monolithic Power Systems
The third company that meets the above-listed criteria is Monolithic Power Systems Inc (MPWR, Financial), a Kirkland, Washington-based semiconductors company.
The company has hit a capital spending growth rate of 920% over the past five years as it purchased fixed assets for nearly $97 million in the full fiscal year 2019, an amazing growth compared to $9.5 million as of the full fiscal year 2014.
According to Wall Street sell-side analysts’ estimate, Monolithic’s EPS will grow by 24.3% next year (versus 16% rate of the S&P 500) and 25% on average every year (versus 7% rate of the S&P 500).
The stock has a buy recommendation rating and an average price target of $203.11 per share versus Wednesday’s closing price of $141.63.
The share price has grown by only 1% in the past year. Currently, it still trades below the 200-, 100- and 50-day simple moving average lines.
The stock has a market capitalization of $6.32 billion, a price-earnings ratio of 59.76 versus the industry median of 19.69, a price-book ratio of 7.99 versus the industry median of 1.49 and a price-sales ratio of 10.33 versus the industry median of 1.42.
Disclosure: I have no positions in any securities mentioned.
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