The Rule of 10 for Deciphering the Next Stock Market Champions
Choosing growth stocks with the best upside potential can be a challenging task for any investor. If you are looking to discover tomorrow’s biggest winners based on insights from Wall Street’s top analysts, then Goldman Sachs Group, Inc. (GS) may have a simple yet effective solution for you. They have developed a strategy known as the “Rule of 10,” which involves identifying businesses that are capable of consistently increasing their revenues by at least 10%. As of early 2025, 21 S&P 500 companies, including some of the rapidly growing corporations we will highlight below, have met these criteria set forth by Goldman Sachs.
Goldman Sachs created the “Rule of 10” as a way to identify the next wave of stocks that have the potential to soar in value. In order to pass this test, companies must demonstrate a consistent pattern of achieving 10% revenue growth and show the ability to sustain this growth in the future. The fact that 21 S&P 500 stocks have met Goldman’s income requirements in early 2025 is a testament to the success of this strategy.
What is the Rule of 10?
To understand the “Rule of 10,” analysts at Goldman Sachs looked at the attributes that made today’s most successful companies, such as Alphabet Inc. (GOOGL), Amazon.com Inc. (AMZN), Apple Inc. (AAPL), Meta Platforms, Inc. (META), Microsoft Corporation (MSFT), NVIDIA Corp. (NVDA), and Tesla, Inc. (TSLA), stand out from the rest. By studying these companies, they were able to create a screening process that can help identify the stocks with the greatest potential to outperform the S&P 500.
How the Rule of 10 Works
In order to pass the Rule of 10 test, companies must meet the following criteria:
– Be listed on the S&P 500 Index.
– Have achieved at least 10% revenue growth in each of the last two years.
– Be expected to continue growing revenues by at least 10% in the current year, the next fiscal year, and the fiscal year following that.
Stocks Approaching the Rule of 10 Criteria
Following a screening process that projected sales growth of at least 10% in 2024, 2025, 2026, and 2027, the S&P 500 was analyzed for companies that had achieved at least 10% revenue growth in 2022 and 2023. As of Jan. 28, 2025, the following stocks had met these criteria:
How Can One Find Rule of 10 Stocks?
As time progresses and analysts revise their revenue growth estimates, the companies that pass the Rule of 10 test may change. By inputting the criteria mentioned above into a screening tool, investors can identify which stocks Goldman Sachs believes have a strong potential to outperform the market in the future. While this process may require more time, it is also possible to compile the necessary information for all S&P 500 stocks.
Additionally, it is important to note that some popular companies among investors narrowly missed meeting the Rule of 10 criteria, including Alphabet, Amazon, Synopsys Inc. (SNPS), Visa Inc. (V), and Intuitive Surgical (ISRG).
The Final Thought
Goldman Sachs’s Rule of 10 focuses on historical and projected revenues to identify the next set of S&P 500 stocks that are poised for significant capital appreciation. It is essential to understand that the Rule of 10 is a stock screening tool and not a comprehensive list for making investment decisions. Instead, it should be viewed as a starting point for generating investment ideas.
In conclusion, by utilizing insights from the Rule of 10 and other market analysis tools, investors can potentially uncover the next group of stock market champions. Whether you are a seasoned investor or just starting out, having a solid investment strategy based on proven methods can help you navigate the complex world of stock market investing with more confidence and success.
