It’s easy to fall under the notion that ESG stocks – that is, enterprises that prioritize environmental, social and governance-related directives – will somehow generate less stakeholder profits than enterprises that aren’t so generous. After all, why would a company investing in doing the right thing be better off than those cutting corners?
It’s simple, straightforward logic – and it could also be dead wrong. For example, thought leaders like McKinsey laid out several reasons why ESG stocks could profit from their morals. One of the key talking points centered on the realized cost savings of following the rules. In other words, by doing the right thing the first time, companies can avoid regulatory and legal penalties.
Further, it’s important not to overlook that social mores have changed and that means consumer mores have also shifted. Today’s emerging consumer demographic – we’re talking about Generation Z – care about issues such as equity and sustainability. By ignoring these matters, businesses would be effectively shooting themselves in the foot.
So, with a whole lot to gain, doing right could be immensely profitable. On that note, below are ESG stocks to consider.
Woodward (WWD)
When it comes to viable ESG stocks to buy, the aerospace and defense sector may not be the first idea that comes to mind. However, Woodward (NASDAQ:WWD) just might change your mind. Last year, WWD stock made the list of Investor’s Business Daily’s 100 Best ESG Companies. Indeed, Woodward ranked quite high in third place.
According to Mordor Intelligence, the U.S. aerospace and defense market may reach a valuation of $496.56 billion by year’s end. By 2029, the sector could be worth $656.93 billion, implying a compound annual growth rate (CAGR) of 5.76%. What’s compelling about Woodward is that the business could outpace the mainline sector.
Covering experts believe that the company’s earnings per share could hit $5.99, implying an expansion of 58.5% from last year. Also, revenue could fly up to $3.31 billion, translating to a growth rate 13.7%. What makes WWD all the more compelling is that it’s been consistently beating its bottom-line earnings targets.
It goes to show you that even with a business prioritizing ESG, it doesn’t necessarily doom it. Instead, as with Woodward, you can enjoy outsized success.
Mastercard (MA)
One of the world’s top financial services firm, Mastercard (NYSE:MA) is a globally renowned credit specialist. It also ranks as one of the top ESG stocks to buy. On IBD’s list, the credit card company landed in fifth place. However, its focus on core initiatives such as equity and inclusion doesn’t mean that it lost its business edge. It might even be better for all its philanthropy.
According to Mordor Intelligence, the credit card market size may reach a valuation of $14.31 trillion by year’s end. Further, the segment could expand to $17.14 trillion by 2029. If so, that would translate to a CAGR of 3.67%. However, Mastercard could easily outpace this trend. Analysts anticipate that in fiscal 2024, EPS will rise to $14.32, implying a growth rate of 16.8%.
On the top line, sales could hit $27.85 billion, a rise of 11%. Further, in fiscal 2025, EPS might land at $16.65 on sales of $31.33 billion. Adding credibility to this narrative is the fact that against bottom-line targets, Mastercard has beaten all four of its analysts’ projections.
Adobe (ADBE)
Software giant Adobe (NASDAQ:ADBE) is a powerhouse in the software industry, featuring a market capitalization of over $235 billion. In my opinion, Adobe could be a mainstay in the gig economy. On IBD’s list, ADBE stock ranked at number 14. Even with such a lofty position among ESG stocks, Adobe hasn’t lost its magic touch.
It’s also handily beating its market. According to Grand View Research, the global software sector reached a valuation of $583.47 billion in 2022. Between 2023 to 2030, experts in the field believe the space could expand at a CAGR of 11.5%. At the forecast culmination point, the ecosystem could be worth about $1.4 trillion.
That’s impressive. However, analysts anticipate that in fiscal 2024, Adobe’s EPS could rise 21.7% to hit $18.03. On the top line, sales could clock in at $21.46 billion, implying 20% expansion from last year’s tally of $17.89 billion.
What’s more, in fiscal 2025, EPS could land at $20.36 on revenue of $23.91 billion, with a blue-sky target calling for $24.74 billion. With that, ADBE ranks among the top ESG stocks to buy.
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.
