Ranking the “Magnificent Seven” From Most to Least Attractive, Based on Projected Cash Flow

Since early August, all three of Wall Street’s major stock indexes have catapulted to record highs. Although artificial intelligence (AI) has been the clear catalyst behind this move, it’s the “Magnificent Seven” that have lifted the stock market to new heights. The Magnificent Seven consists of (in descending market cap):

These trillion-dollar businesses are leaders within their respective industries, but this doesn’t mean they’re all worth buying. While there’s a laundry list of ways to value stocks, arguably none work better for the Magnificent Seven than projected cash flow.

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Ranking the Magnificent Seven by their projected cash flow

The price-to-earnings (P/E) ratio is the go-to for most investors when quickly evaluating a public company. While the traditional P/E ratio works great for mature businesses, it struggles to tell the full story for high-growth stocks.

More importantly, all of the Magnificent Seven companies reinvest a substantial percentage of their cash flow into high-growth initiatives. This makes cash flow and projected cash flow, not the P/E ratio, the best measure to determine if a Magnificent Seven stock is a bargain or bloated.

According to Wall Street’s consensus cash-flow-per-share estimates for 2027, as of Sept. 25, here’s how the Magnificent Seven rank from most (i.e., cheapest) to least (i.e., priciest) attractive:

Based solely on cash flow, Elon Musk’s Tesla and iPhone maker Apple are the antithesis of a bargain. By comparison, dual-industry leader Amazon and social media titan Meta Platforms stand out as genuine bargains amid the second-priciest stock market in history.

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Amazon and Meta remain attractive amid a historically pricey stock market

For the first time in several months, Amazon has leapfrogged Mark Zuckerberg’s Meta to become the most attractive Magnificent Seven stock by future cash flow. Whereas Amazon closed out every year of the 2010s at 23 to 37 times its reported cash flow, shares can now be purchased for less than 11 times next year’s projected cash flow.