Thursday, July 14, 2011

Why Growth Stocks Get a Premium - They are Rare

Interesting chart via JPMorgan showing how few stocks in the S&P 500 have even a 15% annual revenue growth rate.   Those that do, get quite a premium.  While this is a reflection only on the largest companies in the index, we of course see a similar premium (if not much larger) within the Russell 2000.
  • "Our analysis of S&P 500 companies shows investors are willing to pay for outsized revenue growth as it suggests more sustainable long term EPS growth…Only 9% of companies in the S&P 500 are growing revenue above 15% and they trade at a ~60% premium to the rest of the index," they write.
[click to enlarge]

Via BusinessInsider

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