An X-Ray View of the Magnificent Seven

This article first appeared on GuruFocus.

By John DorfmanDecember 22, 2025 (Maple Hill Syndicate)

For the past three years, a huge share of the stock market’s action has been in the Magnificent Seven, a small group of super-successful, super-popular stocks.

There are signs of fatigue in this leadership group. But the Magnificent Seven remain mainstays in many portfolios. They are Alphabet (NASDAQ:GOOGL), Amazon (NASDAQ:AMZN), Apple (NASDAQ:AAPL), Meta Platforms (NASDAQ:META), Microsoft (NASDAQ:MSFT), Nvidia (NASDAQ:NVDA) and Tesla (NASDAQ:TSLA).

Here are several perspectives on these key stocks. Think of them as a series of medical tests X-rays, blood tests, magnetic-resonance imaging and the like.

The best stock-market performer among the Magnificent Seven this year by far is Alphabet, up 63% through Dec. 19.

None of the seven are down, but Amazon is a laggard, up 4%, while the Standard & Poor’s 500 Total Return Index has climbed more than 17%.

There are no cheap stocks among the Magnificent Seven.

If we compare each company’s stock price to its earnings, Meta Platforms looks best, selling for 29 times earnings. The most expensive by a mile is Tesla, at more than 300 times earnings.

Tesla’s peak profit year was 2022, and its earnings have declined three years in a row.

The Magnificent Seven companies generally boast high profits as a percentage of sales. That’s part of what makes them magnificent. Consequently, they sell at above-average multiples of sales.

The most expensive on this score is Nvidia, at 24 times sales.

The cheapest is Amazon, at 3.6 times sales though cheap is relative. I generally look for price/sales ratios of 2.0 or less.

Book value equals a company’s assets minus its liabilities. Stocks that are cheap compared to book value may be bargains.

None of the Magnificent Seven are cheap by this metric. The average stock today sells for about 2.8 times book value, well above the historical norm.

The least expensive among the group is Amazon at 6.6 times book. The most costly is Apple, at 54 times book.

The Magnificent Seven are famous for rapid revenue and earnings growth.

Over the past decade, the most impressive growth rate belongs to Nvidia, at 47% per year. Nvidia also boasts:

• the best five-year growth rate at 74% annually

• the best one-year earnings growth, at 54%

The only negative figure in the group is Tesla’s earnings growth over the past year, which is down 20%.

Strength predominates here as well. Most of the Magnificent Seven carry relatively little debt.

An exception is Apple, with debt equal to 134% of stockholders’ equity.

The cleanest balance sheets belong to Alphabet and Nvidia, each with debt equal to only 9% of equity.

A common measure of profitability is return on equity profits as a percentage of a company’s net worth.

Apple leads on this measure at 169%, followed by Nvidia at 111%. Tesla trails at roughly 7%.

Another useful measure is net margin (profits as a percentage of sales). Alphabet, Meta and Microsoft all exceed 30%, which is outstanding. Nvidia stands at an almost absurd 53%. Tesla lags again, at just over 5%.

For growth stocks, the PEG ratio (price/earnings divided by growth rate) is particularly informative.

For example, Microsoft trades at a P/E of 34, divided by its growth rate of 19.9, yielding a PEG of 1.7, fairly typical for this group.

Investors usually get excited when PEG ratios fall below 1.0. Only Nvidia achieves that distinction, with a PEG of 0.6.

Finally, I looked at analyst recommendations as a percentage of total coverage.

Amazon leads with nearly 96% positive ratings, followed by Microsoft at almost 94%.

The only stock below the 50% line is Tesla, at 44%.

My favorite in this exalted group is Alphabet, which I regard as perhaps the most innovative company in the U.S.

It owns not only the Google search engine, but also YouTube, Waymo self-driving cars, and the DeepMind artificial-intelligence lab.

I’m neutral on five of the remaining six stocks and would shy away from Tesla, which faces increasing competition from both U.S. and Chinese automakers.

John Dorfman is chairman of Dorfman Value Investments in Boston. His firm or its clients may own or trade securities discussed in this column. He can be reached at jdorfman@dorfmanvalue.com.