These stocks consistently grow earnings and have a track record of strong returns

Published Thu, Feb 15 20249:32 AM EST

Several stocks, including PepsiCo to Expedia , can provide steady returns and earnings growth in the face of greater volatility, according Wolfe Research. A hotter-than-anticipated inflation reading on Tuesday sparked a sell-off that led the Dow Jones Industrial Average to decline 1%, its worst loss since March 2023. The S & P 500 and Nasdaq Composite also retreated more than 1% on the day. Against this backdrop, investors may want to keep their eyes on stocks that reliably deliver strong returns. Wolfe Research screened for companies with a history of strong returns — as gauged by return on equity and return on capital employed — along with consistent earnings growth. Specifically, Wolfe searched for names with: ROE in the top 40% of the firm's universe of stocks Three-year average EPS growth of more than 6% EPS expected to grow by more than 6% over the next two years Low short interest Take a look at some of the stocks that made the cut: Big-box retailer Costco is one of the retailers that continues to post strong gains. Shares are up nearly 9% so far this year, and have gained more than 42% over the past 12 months. According to Wolfe Research analysts, the company has an ROCE, or return on capital employed, of 27%. Costco has been a recent favorite among analysts. On Thursday, UBS maintained its buy rating and adjusted its price target on Costco by $100 to $825, saying the membership warehouse continues to "execute at a high level and take market share" despite slower consumer demand. Goldman Sachs thinks Costco could be primed for a "new strategic era" after the retailer announced a new chief financial officer on Feb. 6 for the first time in 40 years. "We see a new external hire possibly bringing in ideas based on previous experience which could include a focus on building out the company's digital, media and/or fulfillment businesses," Goldman analyst Kate McShane wrote in a Feb. 9 note, adding that these "alternative businesses" could be the future for those selling groceries. Her $749 price target on the buy-rated shares suggests 15.5% upside potential. Travel company Expedia has a current ROCE of 42% and projected ROCE of 101% over the next 12 months, according to Wolfe Research. Shares took a nosedive after Expedia said it expected revenue growth to falter this year due to softened air fares since pandemic highs. The company posted worse-than-expected bookings for the fourth quarter and a CEO transition plan, despite beating earnings and revenue expectations for the period. Still, analysts surveyed by FactSet rate the stock overweight and have a consensus price target of $161, which implies shares could gain roughly 19% from Tuesday's close. Morgan Stanley raised its price target on the company by $15 to $150, citing stronger-than-expected guidance for the second half of this year in a Feb. 9 note. Fast-casual burrito chain Chipotle Mexican Grill is another stock with historically strong returns and earnings growth, according to the firm's screener. Chipotle's shares are up 13.8% so far this year, buoyed by strong fourth-quarter earnings driven by improved sales and margins. Several analysts raised their price targets and estimates on the stock after the earnings, expecting its value proposition to outperform the market environment, according to FactSet. Other stocks on the list include financial technology company Fiserv , retailer Ralph Lauren and cosmetics chain Ulta Beauty .