In this article, we will take a look at the stocks with the best earnings growth for the next 3 years.
Earnings growth has long remained one of the most powerful drivers of shareholder returns in the long term. While temporary market moves impact the sentiment and stock price, it’s the earnings profile that creates lasting value. As investors look toward the next couple of years, the focus is shifting to companies that demonstrate expansion, solid fundamentals, and innovation.
On June 16, Reuters published an article titled “The era of pure passive investing is over,” highlighting that investing in equities appeared relatively straightforward for much of the last 40 years. This was driven by lower corporate taxes, globalization, and a decline in interest rates, the article added.
However, the publication noted that after last year’s rise in tariffs and AI, four key structural tailwinds that supported asset values have now weakened. These include continuously declining interest rates, falling corporate taxes, high government debt tolerance, and natural investing demand.
The article states that the effects of AI and other structural shifts are reshaping the real economy rapidly, adding that the results for investors are already visible. Since 2022, intra-stock correlations in the S&P 500 have declined sharply.
Keeping this outlook in mind, we have compiled a list of 10 stocks with the best earnings growth for the next 3 years.
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Our Methodology
For this article, we considered stocks with market capitalizations exceeding $2 billion. After this initial screening, we filtered for stocks with both forecasted EPS growth over the next 3 years and a return on equity of over 20%. We shortlisted stocks based on the number of hedge funds holding positions in these stocks. We limited our final selection to companies that have recently reported noteworthy developments likely to impact investor sentiment. These stocks were then ranked in ascending order by the number of hedge fund holdings.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Insider Monkey’s quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 599.2% since May 2014, beating its benchmark by 372 percentage points (see more details here).
10. Seagate Technology Holdings plc (NASDAQ:STX)
Number of Hedge Fund Holders: 93
On June 12, JPMorgan raised the price target on Seagate Technology Holdings plc (NASDAQ:STX) to $920 from $775 and reaffirmed an Overweight rating. An optimistic outlook on pricing, leading to expected incremental margins in the quarters ahead, has resulted in higher earnings estimates for the HDD companies. No wonder the company is among the stocks with the best earnings growth for the next 3 years.
Although the companies have already turned positive on YoY pricing for the first time in the March quarter, JPMorgan anticipates further acceleration in the coming quarters, maintaining sequential price increases in the low- to mid-single digit range.
Later on June 15, Morgan Stanley also lifted the price target on Seagate Technology Holdings plc (NASDAQ:STX) to $1,035 from $767 and reiterated an Overweight rating. The firm said its Asia checks from the past three years point to a hard disk drive cycle that is gaining further momentum, with greater shortages anticipated through at least CY28. The firm also notes that HDD pricing is “clearly, and meaningfully, strengthening.”
Seagate Technology Holdings plc (NASDAQ:STX) is an American company providing data storage technology and infrastructure solutions. The company’s core offerings include mass capacity storage products, legacy applications, and external storage solutions.
9. Palantir Technologies Inc. (NASDAQ:PLTR)
Number of Hedge Fund Holders: 96
On June 16, Wolfe Research upgraded Palantir Technologies Inc. (NASDAQ:PLTR) to Peer Perform from Underperform after resuming coverage. According to the firm, the company’s AI platform, ontology, and forward-deployed engineers provide a strong foundation to turn AI interest into “scaled enterprise adoption.”
The company’s current valuation already reflects much of its strengthened growth and margin outlook, the firm asserted, adding that Palantir Technologies Inc. (NASDAQ:PLTR) has one of the strongest product-market fits today. With the largest and fastest growth rates, the company is well-positioned as one of the strongest applied enterprise AI software companies in the industry.
Back on June 5, Rosenblatt reaffirmed a Buy rating and a price target of $225 on Palantir Technologies Inc. (NASDAQ:PLTR). This comes after the company’s AIPCon 10 event, at which management announced several customer engagements and an expanded partnership with Google Cloud. According to the firm, the company appears as one of the most crucial components of the enterprise AI value chain. Thus, making it one of the stocks with the best earnings growth for the next 3 years.
Palantir Technologies Inc. (NASDAQ:PLTR), incorporated in 2003, is a Florida-based software platform provider for the intelligence community, supporting counterterrorism investigations and operations.
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