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.
Long story short, there is a near-perfect correlation between consistent earnings growth and huge winners. Keeping that in mind, here are three market-beating stocks that deserve a spot on your list.
United Rentals (URI)
5-Year Return: +532%
Owning the largest rental fleet in the world, United Rentals (NYSE:URI) provides equipment rental and related services to construction, industrial, and infrastructure industries.
Why Will URI Outperform?
- Average organic revenue growth of 10.9% over the past two years demonstrates its ability to expand independently without relying on acquisitions
- Disciplined cost controls and effective management resulted in a strong long-term operating margin of 25.5%, and its operating leverage amplified its profits over the last five years
- URI is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders
United Rentals’s stock price of $625.88 implies a valuation ratio of 13.7x forward price-to-earnings. Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.
Allison Transmission (ALSN)
5-Year Return: +174%
Helping build race cars at one point, Allison Transmission (NYSE:ALSN) offers transmissions to original equipment manufacturers and fleet operators.
Why Do We Like ALSN?
- Superior product capabilities and pricing power are reflected in its best-in-class gross margin of 47.8%
- Share repurchases have amplified shareholder returns as its annual earnings per share growth of 22.1% exceeded its revenue gains over the last two years
- Robust free cash flow margin of 20.2% gives it many options for capital deployment
Allison Transmission is trading at $96.04 per share, or 10.9x forward price-to-earnings. Is now the right time to buy? Find out in our full research report, it’s free.
TopBuild (BLD)
5-Year Return: +233%
Established in 2015 following a spinoff from Masco Corporation, TopBuild (NYSE:BLD) is a distributor and installer of insulation and other building products.
Why Does BLD Stand Out?
- Market share has increased this cycle as its 15.2% annual revenue growth over the last five years was exceptional
- ROIC punches in at 18.4%, illustrating management’s expertise in identifying profitable investments, and its returns are climbing as it finds even more attractive growth opportunities
At $307.13 per share, TopBuild trades at 13.6x forward price-to-earnings. Is now a good time to buy? See for yourself in our full research report, it’s free.
Stocks We Like Even More
With rates dropping, inflation stabilizing, and the elections in the rearview mirror, all signs point to the start of a new bull run - and we’re laser-focused on finding the best stocks for this upcoming cycle.
Put yourself in the driver’s seat by checking out our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.
Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Comfort Systems (+751% five-year return). Find your next big winner with StockStory today for free.
