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Find Strong Stocks to Buy for April and Beyond with this Screen
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The market climbed again on Tuesday to help continue what’s been a nice run off its March 14 lows. Wall Street has once again proven it’s willing to buy stocks when it feels the selling has been a bit overdone. The Nasdaq is now up around 12% in the last week, while the S&P 500 has popped roughly 8%.
The comeback coincided with the updated outlook for interest rate hikes that the Fed provided last week. After the initial 0.25% raise off the rock-bottom levels, the central bank plans to lift its core rate to near 2% by the end of 2022 and around 2.75% by 2023.
The market is happy to know this much, but Jay Powell and the Fed could, no doubt, be forced to dramatically update the recently announced playbook if inflation doesn’t start to slowly come down from its 40-year highs in the coming months. The Russia/Ukraine situation makes the near-term outlook even murkier.
The market is still down well off its peaks and investors appear to have few alternatives outside of stocks if they hope to outpace 7%+ inflation. With this in mind, some might decide to buy stocks heading into April and beyond, especially if they have investment horizons that extend for years.
One way to find strong stocks amid the uncertainty and rising rate environment is to look for companies that have proven they can turn assets into profits.
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 are two of the roughly 10 stocks that made it through today’s screen…
Jabil (JBL - Free Report) is a manufacturing solutions provider and electronics maker. JBL topped our Q2 fiscal 2022 estimates last week and raised its outlook. Jabil’s revenue is now projected to climb over 11% this year to nearly $33 billion, based on Zacks estimates. Meanwhile, JBL’s adjusted 2022 earnings are expected to surge 29%, with more top and bottom-line growth expected next year.
Jabil has fallen along with the rest of the market in 2022, which offers investors a potentially more enticing entry point into the stock. Still, Jabil shares have climbed 130% in the last three years to blow away the electronics market’s 30% run and the Zacks Tech sector’s 75%. And the stock trades at a solid discount to its industry at 10.4X forward 12-month earnings vs. 18X for the larger electronics market.
Century Communities, Inc. (CCS - Free Report) is a large U.S. homebuilder. Century Communities, which operates under a few brands, works in nearly every aspect of the building process from the start to finish. CCS topped our Q4 earnings and revenue estimates in early February. Century Communities posted a blowout year in 2021, driven by the booming housing market, with deliveries up 14% to a record 10,805 homes.
Meanwhile, Century Communities saw its revenue surge 33% to $4.2 billion, which came on top of 25% growth in FY20, 18% in 2019, and 51% in FY18. Zacks estimates call another 15% revenue growth in FY22 and 19% higher adjusted earnings. CCS has topped our EPS estimates by an average of 39% in the trailing four quarters and its Home Builders industry is in the top 21% of over 250 Zacks industries right now.
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.
Want more articles from this author? Scroll up to the top of this article and click the FOLLOW AUTHOR button to get an email each time a new article is published.
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.
Image: Bigstock
Find Strong Stocks to Buy for April and Beyond with this Screen
The market climbed again on Tuesday to help continue what’s been a nice run off its March 14 lows. Wall Street has once again proven it’s willing to buy stocks when it feels the selling has been a bit overdone. The Nasdaq is now up around 12% in the last week, while the S&P 500 has popped roughly 8%.
The comeback coincided with the updated outlook for interest rate hikes that the Fed provided last week. After the initial 0.25% raise off the rock-bottom levels, the central bank plans to lift its core rate to near 2% by the end of 2022 and around 2.75% by 2023.
The market is happy to know this much, but Jay Powell and the Fed could, no doubt, be forced to dramatically update the recently announced playbook if inflation doesn’t start to slowly come down from its 40-year highs in the coming months. The Russia/Ukraine situation makes the near-term outlook even murkier.
The market is still down well off its peaks and investors appear to have few alternatives outside of stocks if they hope to outpace 7%+ inflation. With this in mind, some might decide to buy stocks heading into April and beyond, especially if they have investment horizons that extend for years.
One way to find strong stocks amid the uncertainty and rising rate environment is to look for companies that have proven they can turn assets into profits.
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 are two of the roughly 10 stocks that made it through today’s screen…
Jabil (JBL - Free Report)
Jabil (JBL - Free Report) is a manufacturing solutions provider and electronics maker. JBL topped our Q2 fiscal 2022 estimates last week and raised its outlook. Jabil’s revenue is now projected to climb over 11% this year to nearly $33 billion, based on Zacks estimates. Meanwhile, JBL’s adjusted 2022 earnings are expected to surge 29%, with more top and bottom-line growth expected next year.
Jabil has fallen along with the rest of the market in 2022, which offers investors a potentially more enticing entry point into the stock. Still, Jabil shares have climbed 130% in the last three years to blow away the electronics market’s 30% run and the Zacks Tech sector’s 75%. And the stock trades at a solid discount to its industry at 10.4X forward 12-month earnings vs. 18X for the larger electronics market.
Century Communities (CCS - Free Report)
Century Communities, Inc. (CCS - Free Report) is a large U.S. homebuilder. Century Communities, which operates under a few brands, works in nearly every aspect of the building process from the start to finish. CCS topped our Q4 earnings and revenue estimates in early February. Century Communities posted a blowout year in 2021, driven by the booming housing market, with deliveries up 14% to a record 10,805 homes.
Meanwhile, Century Communities saw its revenue surge 33% to $4.2 billion, which came on top of 25% growth in FY20, 18% in 2019, and 51% in FY18. Zacks estimates call another 15% revenue growth in FY22 and 19% higher adjusted earnings. CCS has topped our EPS estimates by an average of 39% in the trailing four quarters and its Home Builders industry is in the top 21% of over 250 Zacks industries right now.
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.
Want more articles from this author? Scroll up to the top of this article and click the FOLLOW AUTHOR button to get an email each time a new article is published.
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: https://www.zacks.com/performance/