The Earnings Season MVP Could Double From Here
Listen to this post
In fantasy, everyone’s gunning for the players with the best individual stats to add to their team. The winning formula would be to choose a running back with the most yards per game… or a QB with a high completion percentage.
By using historical data on each player, you’re sifting out the studs from the duds. Stocks should be selected with the same logic. You need to have strict criteria for building your all-star portfolio.
And right now, earnings season, is the perfect time to fill out your roster. Today, I’ll show you a company with Patrick Mahomes-like stats that’s set to stay on top of the leaderboards.
Not only that, I’ll give you one holy grail signal that just fired… and show you why history says this stock is heading for the Hall of Fame.
META Platforms (META) is the MVP This Earnings SeasonI don’t use the word holy grail lightly.
But some stocks are well deserving of this title.
I said it about Microsoft back in September. And I did it again with Mastercard late last year.
Both of those stocks sport the most important attributes for multi-year outperformance: Revenue and earnings growth.
Using the same yardstick, I’m going to add Meta Platforms (META) to the next company worthy of owning over the long haul.
If you haven’t heard by now, the social media giant absolutely destroyed its latest earnings report, sending the stock rocketing 20%:
Folks, a 20% one-day jump in a trillion-dollar company must mean something spectacular was announced.
Boy was it!
For the fourth quarter, META saw sales of $40.11 billion vs. FactSet estimates of $39.12 billion. This jump in business also fell to the bottom line with EPS coming in at $5.33/share vs. estimates of $4.82/share.
While that’s great and all, it’s the forward guidance that kicked the stock into the stratosphere.
For the first quarter, the revenue guidance from the company now stands at a midpoint of $35.75 billion, monumentally higher than Wall Street expectations of $33.93 billion.
If you recall, this is the only type of headline worth clicking… because it signals new unexpected growth.
And it’s hardly the first time this has happened. META has a rich history of revenue and earnings growth…
As a reminder, those are two hallmark traits of holy grail stocks.
Here’s Meta’s revenue and net income over the past five years:
The key here is the steady growth.
The black bars show that revenue has ballooned from $55.8 billion in 2018 to $134.9 billion in 2023. That’s outlier stats akin to drafting a fantasy running back averaging 150 yards a game.
Even more impressive is the net income growth in yellow. That’s the amount of money left over after doing business and removing business costs, expenses, interest, and taxes.
In 2023 alone, the company saw $39.1 billion in net income, showcasing how fantastically profitable this business is.
But these two focal points aren’t what truly blew the doors off the earnings report. It’s the fact that the company initiated its first ever quarterly dividend of 50 cents per share.
This signals to Wall Street that META is meta-morphing into an income play.
Since we know how profitable META is as a business, it doesn’t take a genius to realize this company has the power to continually raise the payout.
That’s the final piece of the holy grail puzzle.
Now, not only are growth and tech investors going to pounce on META shares…but a new legion of investors are too… the income chasers.
You may ask, what’s so special about initiating a dividend?
Turns out, those are some of the best performing stocks.
Here’s the proof.
Hartford Funds and Ned Davis Research studied different dividend policies for the S&P 500 stocks since 1973. They found that companies that initiate and grow dividends crush non-dividend payers by a wide margin.
Dividend initiations are a powerful signal, telling investors they are now going to be compensated for being a shareholder.
The revenue growth, net income growth, and new dividend make META a great draft choice for your portfolio. After seeing this earnings report, it would not shock me to see META add another $1 trillion to its market cap over time.
By stacking odds like these in your favor, the likelihood of success explodes. That’s why having a data-driven process and using TradeSmith’s software, is mission-critical.
Let data pick the players… chances are you’ll stumble across a holy grail draft choice.
Contributing Editor, TradeSmith Daily