MW 20 stocks of companies that have improved profit margins and are expected to grow quickly

By Philip van Doorn

These companies are more profitable than they were a year ago. They are also expected to put up huge sales growth numbers through 2027.

Every quarter, after the majority of companies in the S&P 500 have reported their earnings results, we look at profit margins and revenue growth. The idea is that increasing sales rapidly while improving profit margins can only be a good thing.

We last ran this quarterly screen in May. While the data was current and highlighted positive developments, that screen only looked back.

Now that we're between earnings seasons, it is a good time for a screen that incorporates improving profitability and anticipated sales growth. We have done this with the S&P 500 SPX, taking the sales estimates out to 2027.

To run the screen, we began with the components of the S&P 500, for which quarterly gross profit margins and operating profit margins are available from FactSet for 455 companies. These figures aren't available for many companies in the financial sector because banks and insurers have their own industry-based measures of profitability. FactSet calculates the margins in a uniform manner, which means some of the data provider's calculations may differ from the margins reported by the companies.

A company's gross margin is its net sales, less the cost of goods or services sold, divided by sales. Net sales are sales minus returns and discounts, such as coupons. The cost of goods or services sold includes the actual expenses when making the items or providing the services. Gross margin is an indicator of pricing power and core efficiency.

A company's operating margin incorporates more expenses that aren't directly related to the production of goods and services. It can be summarized as earnings before interest and taxes, divided by sales.

Here is a summary of the new screen for improved margins and estimated sales growth:

-- Among the 455 companies in the S&P 500 for which the margin data was available from FactSet, gross margins improved from the year-earlier quarter for 251 and operating margins improved for 261. There were 198 companies for which both margins improved.

-- Among the 198 companies, 159 had increased their quarterly sales per share from the year-earlier quarter. For this part of the screen, we used sales per share rather than raw revenue, because the per-share numbers would reflect any increase to the share count. A company that acquires a competitor might issue a large number of shares to pay for the acquisition. Of course, revenue will rise, but shares-per-share may rise by a smaller amount, depending on how the deal was structured.

-- We then took the remaining 159 companies and screened them for expected compound annual growth rates $(CAGR)$ for revenue from 2025 through 2027, based on consensus estimates among analysts polled by FactSet. These are calendar-year estimates, as adjusted by FactSet for companies whose fiscal reporting periods don't match the calendar.

Here are the 20 in the S&P 500 that passed the screen and have the highest expected compound annual growth rates (CAGR) for revenue from calendar 2025 through calendar 2027. The quarterly margin comparisons are to the right and you might need to scroll the table to see all of the data:

   Meta Platforms Inc.              Ticker    Est. sales CAGR from 2025 through 2027  Gross margin  year-earlier gross margin  Operating margin  year-earlier operating margin 
   Eli Lilly and Co.                LLY                                        18.7%        82.53%                     80.91%            45.29%                         34.44% 
   Oracle Corp.                     ORCL                                       17.6%        66.43%                     65.23%            42.46%                         41.81% 
   DoorDash Inc.                    DASH                                       17.4%        45.51%                     41.42%            10.69%                          3.22% 
   Insulet Corp.                    PODD                                       17.1%        72.79%                     70.16%            20.32%                         17.14% 
   Broadcom Inc.                    AVGO                                       17.1%        64.59%                     56.07%            54.46%                         46.77% 
   Teradyne Inc.                    TER                                        16.5%        59.95%                     56.44%            24.66%                         18.07% 
   Fair Isaac Corp.                 FICO                                       16.5%        82.43%                     79.89%            49.94%                         45.69% 
   Advanced Micro Devices Inc.      AMD                                        15.9%        45.98%                     39.61%            20.81%                         15.93% 
   Uber Technologies Inc.           UBER                                       14.5%        32.58%                     30.48%            12.49%                          8.86% 
   Monolithic Power Systems Inc.    MPWR                                       14.2%        55.40%                     55.13%            28.27%                         22.66% 
   Micron Technology Inc.           MU                                         13.5%        37.22%                     18.53%            48.34%                         32.47% 
   Workday Inc. Class A             WDAY                                       13.1%        75.94%                     75.33%            12.90%                          6.61% 
   CoStar Group Inc.                CSGP                                       12.6%        76.71%                     76.26%             0.61%                         -2.00% 
   Meta Platforms Inc.              META                                       12.6%        82.11%                     81.84%            50.70%                         47.83% 
   Fortinet Inc.                    FTNT                                       12.4%        80.96%                     77.48%            31.39%                         25.77% 
   Intuit Inc.                      INTU                                       12.4%        83.05%                     82.38%            50.58%                         49.03% 
   Enphase Energy Inc.              ENPH                                       12.0%        46.29%                     42.55%            15.45%                         -2.68% 
   Quanta Services Inc.             PWR                                        11.6%        11.62%                     10.85%             7.25%                          6.42% 
   Netflix Inc.                     NFLX                                       11.5%        49.31%                     46.95%            68.30%                         68.24% 
   Seagate Technology Holdings PLC  STX                                        11.4%        35.19%                     25.50%            23.33%                         12.39% 
                                                                                                                                                               Source: FactSet 

Combinations of improving margins and high expected growth rates are compelling, but a stock screen has its limits. If you are interested in any individual stocks for investment, you should do your own research and form your own opinions about companies' long-term prospects.

One way to begin that process is to click on the tickers for more information.

Read: Tomi Kilgore's detailed guide to the information available on the MarketWatch quote page

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-Philip van Doorn

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June 09, 2025 09:28 ET (13:28 GMT)

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