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Investments made in excess of depreciation may be important fundamental drivers, according to the Citi equity team.
"While overall capex growth has been strong in recent years, more encouraging is that a larger share of this spend is growth rather than replacement capex," strategist Scott Chronert wrote in a note.
"At the index level, the year-to-year fundamental impact from growth capex may be overshadowed by macro drivers,' Chronert said. "Yet, longer term there is certainly a case to be made that incremental growth capex is a fundamental tailwind."
"Interestingly, in nearly all of the cross sections (yearly), the top third bucket by our growth capex measure realizes higher sales growth and maintains a superior EBITDA margin over the next three years."
Buy-rated S&P 1500 (NYSEARCA:SPTM) (NYSEARCA:ITOT) stocks with growth capex
- Alphabet (GOOGL) 3Y CapEx to Depreciation Ratio 2.1 Growth CapEx '24E ($MLN) $20,305 Growth % of Total Capex '24E 63%
- Amazon.com (AMZN) 2.3 $22,504 43%
- Yum! Brands (YUM) 1.7 $159 56%
- RH (RH) 2.5 $103 59%
- Winnebago Industries (WGO) 3.0 $54 65%
- PepsiCo (PEP) 1.9 $2,804 51%
- Constellation Brands (STZ) 2.8 $652 63%
- Dollar Tree (DLTR) 1.6 $511 41%
- J. M. Smucker (SJM) 1.8 $248 52%
- Simply Good Foods (SMPL) 2.4 $7 62%
- Merck (MRK) 2.5 $2,035 53%
- Exelixis (EXEL) 2.3 $15 36%
- Glaukos (GKOS) 4.0 $12 57%
- Sunrun (RUN) 4.6 $2,102 81%
- Lockheed Martin (LMT) 1.7 $771 46%
- Equifax (EFX) 1.7 $241 40%
- Analog Devices (ADI) 3.0 $927 73%
- Nucor (NUE) 2.3 $1,284 58%
- Steel Dynamics (STLD) 3.5 $1,254 76%
- Alexandria Real Estate (ARE) 5.9 $2,591 70%
- Equinix (EQIX) 1.9 $1,529 48%
- EastGroup Properties (EGP) 3.5 $433 72%
- Duke Energy (DUK) 2.2 $7,351 58%
- Xcel Energy (XEL) 2.3 $3,441 58%
- Edison International (EIX) 2.3 $2,633 50%