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Finding growth stocks with the potential for significant upside can be a daunting task for investors. However, Goldman Sachs Group, Inc. has developed a simple but effective strategy for identifying tomorrow’s biggest winners on Wall Street – the “Rule of 10.” By focusing on companies that are able to consistently grow their revenues by at least 10%, Goldman Sachs aims to uncover the next generation of stock market champions.
The “Rule of 10” is designed to identify companies that have the potential to outperform the market over the long term. In order to meet the criteria, companies must have achieved at least 10% revenue growth in each of the last two years and be projected to continue growing at that rate in the current year and the two subsequent fiscal years. As of early 2025, 21 S&P 500 companies have met Goldman Sachs’ rigorous income requirements, including several fast-growing corporations that are worth highlighting.
Goldman Sachs’ analysts have used the “Rule of 10” to identify a select group of companies with the potential for significant growth in the coming years. By analyzing the characteristics of today’s most successful companies, also known as the “Magnificent Seven,” Goldman Sachs has been able to identify key factors that contribute to a company’s ability to outperform the broader market. Armed with this knowledge, Goldman Sachs’ analysts are able to create a screening tool that helps them identify the next generation of market leaders.
To meet the criteria of the “Rule of 10,” companies must be listed on the S&P 500 index and have achieved at least 10% revenue growth in each of the last two years. Additionally, they must be projected to continue growing at a rate of at least 10% in the current year and the two subsequent fiscal years. By applying these criteria, Goldman Sachs is able to narrow down the universe of potential investment opportunities and focus on companies with a track record of consistent revenue growth.
In order to identify companies that meet the requirements of the “Rule of 10,” investors can use screening tools that are available online. By inputting the criteria specified by Goldman Sachs, investors can quickly identify stocks that are likely to outperform the market in the future. While it may take more time to compile this information for every S&P 500 stock, the potential payoff in terms of identifying high-growth investment opportunities can be significant.
It is worth noting that while the “Rule of 10” is a valuable tool for identifying potential investment opportunities, it should not be the sole factor guiding investment decisions. Investors should conduct thorough due diligence and consider a variety of factors before making any investment decisions. Additionally, it is important to keep in mind that the companies that meet the criteria of the “Rule of 10” may change over time as analysts revise their estimates of income growth.
In conclusion, Goldman Sachs’ “Rule of 10” is a valuable tool for identifying companies with the potential for significant capital appreciation. By focusing on companies with a track record of consistent revenue growth, investors can increase their chances of identifying the next generation of stock market champions. While the “Rule of 10” is not a definitive list of investment recommendations, it serves as a useful starting point for investors looking to identify high-growth opportunities in the stock market.
