You don't have to pay a fortune for S&P 500 stocks with rising profit. If you look, you'll find value-priced stocks in growth mode, too.
Six companies in the S&P 500 Pure Value Index, including American Airlines, United Airlines and Allstate, are all poised to boost profit 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's saying something. This means they're growing much faster than the rest of the S&P 500. Analysts think S&P 500 company profit will rise just 0.8% this year, says FactSet.
Seeking Value In The S&P 500
If there's been a trend in the S&P 500, it's that investors are willing to pay up for growth. That's clear almost any way you look at it.
The SPDR Portfolio S&P 500 Growth ETF is up nearly 20% this year. That easily outpaces the S&P 500's 16.2%. But it completely obliterates the SPDR Portfolio S&P 500 Value ETF's 11.1% gain.
Meanwhile, investors' taste for high-priced growth stocks is very clear when you look inside the S&P 500. The top 10 performing S&P 500 stocks sport an average price-to-earnings ratio at a nosebleed level of 174 times trailing earnings. Investors simply want to own stocks like Nvidia, expected to boost profit by 138% this fiscal year ended in January, at whatever the price.
But it turns out you can find profit growth from cheaper S&P 500 stocks, too.
S&P 500 Profit Growth On A Budget
If you're looking for a cheap stock with high-growth profit, look to the skies. That's a trait many of the airlines stocks share. Five of the six value stocks poised to put up huge profit growth this year are all airlines.
Take American Airlines, for instance. The carrier's adjusted profit this calendar year is expected to boom 565% to $3.33 a share. That's multiple times more growth than at Nvidia. But guess what? Even though shares are up 22% this year so far, they're still trading for less than 4.2 times trailing profit. That makes American one of the cheapest stocks in the S&P 500 — while still one of the fastest growing at the bottom line.
It's a similar story with rival United Airlines. The member of the S&P 500 Pure Value index trades for just 6.5 times trailing earnings. And yet, it's expected to boost profit by 339% this year.
And it's not just an airline thing. Analysts think insurer Allstate is on the verge of posting adjusted profit growth of 151.9% in 2023. Nevermind the stock is down 22% and it's firmly part of the value portion of the S&P 500.
Savvy investors know not to fixate on P-E ratios and valuations. But they also know to follow companies putting up profit growth. And in some cases, you can find both.
S&P 500 Value Stocks Growing Profit Like Crazy
| Company | Ticker | Stock YTD % ch. | EPS ch. est. 2023 |
|---|---|---|---|
| American Airlines | 22.2% | 565.2% | |
| United Airlines | 36.9 | 338.5 | |
| Allstate | -22.4 | 151.9 | |
| Delta Air Lines | 31.6 | 109.8 | |
| Southwest Airlines | -1.8 | 86.8 | |
| Alaska Air Group | 6.0 | 50.5 |
