Stock picks to buy, 13 cheap long-term growth companies: Goldman Sachs - Business Insider

David Kostin — the chief US equity strategist at Goldman Sachs — says some of the largest S&P 500 companies are going to post better earnings over the next five years than their stock prices suggest.As the global economy sinks into a deep recession, there's little hope of earnings growth this year, which might make the long-term bargains Kostin is identifying more valuable. Goldman thinks S&P 500 profits will plunge 33% this year as a result of the coronavirus pandemic and the widespread economic shutdowns and other damages associated with it.Visit Business Insider's homepage for more stories.

Wall Street forecasts from early 2020 look like they could have come from another world.As recently as mid-February, David Kostin — the chief US equity strategist for Goldman Sachs — thought S&P 500 companies would report 6% earnings-per-share growth in 2020. At that time, corporate America had just completed a better-than-expected earnings season.That's ground much of the global economy to a halt. The world is trying to stop the coronavirus pandemic, and experts are trying to figure out how bad the job losses and sudden recession will get — as well as how companies will hold up. As a result, Kostin's firm now expects profits to plunge 33% this year.He and his team are trying to help investors make sense of it all by identifying companies that could outperform in the years ahead. They're doing that by finding companies with underappreciated earnings growth.With little hope of growth in 2020, Kostin's group examined the 80 largest S&P 500 companies and focused on their relative earnings-per-share growth compared to the growth of the index. They calculated the implied growth rate that would be required to justify the price of each company's stock.

The analysis is intended to find the companies that are the most undervalued based on their expected growth over the next five years.The list the Goldman team produced includes two types of earners. Some have posted much stronger profit growth than the average S&P 500 company over the past 10 years, but are being traded as if they'll beat it by a much narrower margin in the future. Others have underperformed, but are trading as if they will fare much worse over the next five years than they have in the past. Here are the 13 companies that are the most undervalued based on Kostin and company's analysis. They are ranked from lowest to highest based on the size of the gap between their past and current implied earnings growth rates.