7 High-Growth Stocks for ESG-Oriented Investors
Generally, a perception exists that supporting environmental, social, and governance (ESG) initiatives may lead to expansion and profitability erosion, though the enthusiasm toward the following high-growth ESG stocks would beg to differ. Incr…
Generally, a perception exists that supporting environmental, social, and governance (ESG) initiatives may lead to expansion and profitability erosion, though the enthusiasm toward the following high-growth ESG stocks would beg to differ. Increasingly, society has become aware of gross inequities in the sociological and environmental realms. Therefore, it might cost enterprises to ignore ESG initiatives altogether.
Some of this narrative comes down to pure math and lifecycle realities. As various research firms pointed out, younger generations consistently hold more liberal views than their preceding generations. Further, the age cohort that staunchly supports conservative views eventually expires, to use clinical language. Thus, the rise and eventual dominance of progressivism bolsters high-growth ESG stocks. Increasingly, then, those that insist on going against increasingly mainstream views may suffer fiscal consequences. Plus, it’s never wrong to do the right thing. With that in mind, below are the high-growth ESG stocks to consider for ethics-oriented investors.
Home Depot (HD)
Source: shutterstock.com/Roman Bodnarchuk
To be sure, Home Depot (NYSE:HD) might not initially sound like one of the high-growth ESG stocks based on political commentary from individuals associated with the home-improvement giant. However, we shouldn’t forget that on balance, Home Depot strives to serve the benefit of its communities. For instance, as an essential business, Home Depot stores stayed open quite late during the worst of the coronavirus pandemic. Personally, I’m grateful for its accommodations.
On the financial side, it’s difficult not to feel good about HD stock. Per Gurufocus.com’s proprietary calculations for fair market value (FMV), HD rates as a modestly undervalued investment. Further, the investment resource’s analysis of the company’s discounted cash flow (DCF) reveals that its fair value should be $474.50 a share. Presently, shares trade hands below $300.
While HD might have a boring reputation, Wall Street analysts peg it a consensus moderate buy. Moreover, their average price target stands at $333.29, implying almost 14% upside potential. Therefore, it’s one of the solid high-growth ESG stocks to buy.
Source: Asif Islam / Shutterstock.com
As I’ve remarked plenty of times now, software stalwart Microsoft (NASDAQ:MSFT) fits into several investment categories. Here, it’s absolutely no stranger to high-growth ESG stocks to buy. Under Microsoft’s Corporate Social Responsibility initiative, it features several commitments to environmental sustainability. Perhaps most notably, it aims to be carbon negative by 2030. Further, by 2050, it will remove its historical emissions since its founding in 1975.
Moreover, Microsoft will be water positive by 2030. This means it will replenish more water than the company uses. In that same year, Microsoft will be a zero-waste enterprise across its direct waste footprint. Not surprisingly, Microsoft features many strengths. Aside from its robust balance sheet, the company kills it operationally. Its three-year revenue growth rate stands at 17.4% while its net margin pings at a blisteringly high 33%. Both stats rate into the top echelon of the underlying industry.
Finally, analysts peg MSFT as a consensus strong buy. Their average price target stands at $292.07, implying over 16% upside potential.
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A financial services giant, Visa (NYSE:V) carries a worldwide reputation for issuing its branded credit cards. Under its ESG initiative, Visa implements robust security networks to protect its customers from cyberattacks. In addition, the company features an empowerment project, seeking to buttress small and micro businesses (SMBs). Under this program, Visa especially focuses on women’s economic advancement and racial equity.
That’s not all. Visa also has committed to carbon neutrality goals. Specifically, it aims to be a net-zero emissions enterprise by 2040. As well, it’s taking strong steps to incorporate renewable energy exclusively.
What investors will appreciate about V being one of the high-growth ESG stocks is that it’s not just talking about “paper” initiatives. On the financials, Visa delivers the goods, especially in the operational realm. For example, its three-year revenue growth rate of 10.7% and a net margin of 50.3% rate in the upper half of the underlying industry. Turning to Wall Street, covering analysts peg V as a consensus strong buy. In addition, their average price target stands at $260.81, implying 19% upside potential.
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A manufacturer of popular household items, Unilever (NYSE:UL) really made a name for itself as one of the high-growth ESG stocks to buy. During the worst of the Covid-19 crisis, the pandemic brought to light several issues of inequity. In response, Unilever forwarded several initiatives aimed at empowerment.
In addition, the company takes great pride in its environmental sustainability initiatives. For one thing, management committed to a clear pathway for zero emissions in Unilever’s operations by 2030. Further, it aims to reach net-zero emissions across its value chain by 2039. Moreover, the company is transitioning to renewable energy across its operations. This includes finding new low-carbon ingredients and expanding its plant-based product range.
As well, Unilever offers a solid enterprise. Conspicuously, it enjoys a strong balance sheet unencumbered with debt. It also features a net margin of 12.74%, outpacing nearly 86% of the competition. Lastly, Argus Research pegs UL as a buy. Its price target is $60, implying 19% upside potential.
Eli Lilly (LLY)
Source: Jonathan Weiss / Shutterstock.com
A major pharmaceutical company, Eli Lilly (NYSE:LLY) primarily earned its reputation for forwarding innovative medical solutions. However, it’s also a company that seeks to profit from doing the right thing. Perhaps most notably, Eli Lilly offers insulin at $35 or less per month. Its website notes that the company helped 1.5 million people through patient support programs for Lilly medicines.
As with the other high-growth ESG stocks on this list, the pharmaceutical firm is committed to various environmental goals. Among them, it seeks to be carbon neutral in its own operations by 2030. As well, it aims to use 100% renewably sourced electricity. To be fair, investors may need some patience with LLY as it might be overvalued. However, the company features incredible profitability. For instance, its operating margin of 29% and a net margin of nearly 22% outpace at least 90% of the competition.
Looking to the Street, covering analysts peg LLY as a consensus moderate buy. Additionally, their average price target stands at $388.86, implying over 23% upside potential.
NextEra Energy (NEE)
Source: PopTika / Shutterstock
With all the talk about renewable electricity, NextEra Energy (NYSE:NEE) makes an organic case for high-growth ESG stocks to buy. Operating wind turbines and solar energy facilities, NextEra represents a major player in sustainability initiatives. Notably, management committed to its zero-carbon blueprint goal of eliminating carbon emissions no later than 2045.
Further, in 2021, NextEra noted that it received an ESG evaluation score of 86 from S&P Global Ratings. It stressed that this was one of the highest rankings to be given by the agency. In fairness, recent troubling events stripped some positive momentum off NEE, with shares down a bit over 8% in the trailing year.
However, this could be a temporary setback. Looking at its financials, NextEra benefits from strong profitability metrics. Specifically, its net margin pings at 19.79%, outpacing 85.47% of sector rivals. Finally, Wall Street analysts peg NEE as a consensus strong buy. Further, their average price target stands at $95.45, implying over 32% upside potential.
Alphabet (GOOG, GOOGL)
Source: IgorGolovniov / Shutterstock.com
As a member of big tech, Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) naturally generates controversy – it comes with the territory. However, perhaps not enough credit goes toward GOOG legitimately ranking among the high-growth ESG stocks to buy. Similar to other ESG-focused enterprises, Alphabet’s Google seeks to be carbon-free by 2030.
As well, Google spearheads various social equity initiatives. For instance, the company seeks to improve leadership representation of underrepresented groups by 30% by 2025. As well, the tech giant will focus on improving the diversity of its value chain. For instance, it aims to spend $100 million on Black-owned businesses. Finally, Google invests considerable funds to foster gender equity in the tech workspace.
Notably, Gurufocus.com’s DCF analysis reveals that GOOG is considerably undervalued. In addition, the company features solid growth and dominating profitability margins. Finally, covering analysts peg GOOG as a consensus strong buy. Their average price target stands at $123.78, implying 34% upside potential.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.
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