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How to Find Top-Ranked Stocks to Buy in May Generating Profits Efficiently

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The strong start to the first full week of May saw the bulls take the Nasdaq and S&P 500 within inches of their all-highs. Wall Street is no longer worried about the possibility of the Fed hiking rates and it has loved results and guidance from a slew of big tech companies.

Alphabet, Microsoft, Apple, and others flexed their incredible ability to generate cash and expand in key growth areas during the last few weeks. 

The recent market comeback showcases the power of staying constantly exposed to the stock market. Only a few weeks ago, the bears were starting to lick their chops while others might have been looking for the exits.

Today we explore how to find Zacks Rank #1 (Strong Buy) stocks with proven track records of efficiently generating profits that investors might want to buy in May and beyond.

ROE

Return on Equity or ROE helps investors understand if a firm’s executives are creating assets with investors’ cash or burning it. ROE shows a company’s ability to turn assets into profits. Put another way, this vital metric measures the profits made for each dollar of shareholder equity.

ROE is calculated as net income / shareholder's equity. For example: if $0.10 of assets are created for each $1 of shareholder equity that would equal a ROE of 10%.

Overall, Return on Equity is a great item to use regardless of what type of investor you are since it provides insight into management’s ability to create value and keep costs under control. Plus, if ROE slips, it can alert us to potential problems.

With all that said, let’s take a look at this screen’s parameters and see the companies proving they can return value to shareholders instead of churning through their cash…

• Zacks Rank equal to 1

The Zacks Rank looks at upward earnings estimate revisions, among other metrics, in order to find companies that are projected to see their earnings get stronger. In fact, beginning with a Zacks Rank #1 can be a great starting point because it boasts an average annual return of over 25% per year during the last 30 years.

• Price greater than or equal to 5

Today we ruled out any stocks that are trading for less than $5 a share because they can be more volatile and speculative.

• Price/Sales Ratio less than or equal to 1

On top of that, we are looking for a low price to sales ratio. Today we went with 1 or below as this range is usually thought to provide better value since investors pay less for each unit of sales.

• % (Broker) Rating Strong Buy equal to 100 (%)

In this screen, we decided to go with companies that brokers are fully on board with since ratings are typically skewed strongly toward ‘buy’ and ‘strong buy.’

• ROE greater than or equal to 10

Lastly, but most importantly for today’s screen, we got rid of any companies with Return on Equity of less than 10 because the median ROE value for all of the stocks in the Zacks Universe is under 10.

Here is one of the four stocks that made it through today’s screen…

Willdan Group ((WLDN - Free Report) )

Willdan provides professional, technical, and consulting services to utilities, government agencies, and private industry. Willdan’s offerings span across electric grid solutions and energy efficiency to sustainability, engineering, and beyond. The company grew its adjusted Q1 earnings by 25% to $0.40 a share to crush our EPS estimate by 110%.

Willdan reaffirmed its 2024 financial outlook on May 2, noting it saw “strength in both government and utility customers, plus strong software sales. The rapid growth in electricity demand from artificial intelligence and data centers is becoming a new catalyst in our market.” Willdan is projected to grow its adjusted EPS by over 3% in 2024 and post 11% stronger EPS next year on the back of 3% and 7%, respective revenue growth.

Zacks Investment Research
Image Source: Zacks Investment Research

Willdan’s upbeat EPS outlook helps it land a Zacks Rank #1 (Strong Buy) and it is part of the Engineering - R and D Services space that lands in the top 33% of all Zacks industries.

WLDN stock is up 54% YTD and 95% in the past year. Willdan has crushed its sector and the S&P 500 over the last 15 years, up 1,800%. The nearby chart showcases that it is possibly ready to test its all-time highs sooner than later.

Get the rest of the stocks on this list and start looking for the newest companies that fit these criteria. It's easy to do. And it could help you find your next big winner. Start screening for these companies today with a free trial to the Research Wizard. You can do it.

Click here to sign up for a free trial to the Research Wizard today.

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Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.

Disclosure: Performance information for Zacks’ portfolios and strategies are available at: www.zacks.com/performance_disclosure


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