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S&P set to change how it classifies US growth and value stocks - Published OnOct 24, 2026 | 12:04 IST - Last Updated OnOct 24, 2026 | 12:05 IST S&P Dow Jones Indices is updating its US growth and value stock classifications. Changes include dropping share price momentum for growth assessments and adding free cash flow and adjusted book value for value assessments. The revised rules will take effect on December 21, 2026, impacting S&P growth... S&P Dow Jones Indices is changing how it classifies US stocks as growth or value, dropping share price momentum from its growth assessment and adding free cash flow to its value assessment. The changes will affect indices such as the S&P 500 Growth and S&P 500 Value, along with corresponding indices tracking mid-cap and small-cap stocks. According to an S&P Dow Jones Indices release dated October 23, the revised rules will take effect on December 21, 2026, as part of its annual index reconstitution. Under the current rules, S&P Dow Jones Indices assesses growth stocks using three factors: the change in earnings per share over three years relative to the current share price, three-year sales per share growth and share price momentum over 12 months. Under the new rules, it will drop the momentum factor and use the other two measures to assess growth stocks. The changes to the value framework are more extensive. S&P Dow Jones Indices will replace the traditional book value-to-price ratio with an adjusted measure that accounts for intangible assets. It will also combine trailing earnings-to-price with forward one-year earnings-to-price, using a simple average of the two. The sales-to-price ratio will remain, while free cash flow-to-price will be added as a new factor. Free cash flow is the cash a company generates after accounting for capital spending. By adding this measure, the index provider will use another way to assess a company's value relative to its share price. However, the new free cash flow measure will not apply to real estate, banks, insurance and certain financial services industries. These sectors and industries will be assessed using the other value factors. Clients will first see the changes in preliminary index files from December 4, before the revised indices take effect ahead of the market opening on December 21.
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