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How to Find "Strong Buy" Stocks Efficiently Generating Profits
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The S&P 500 touched a new record on Tuesday morning ahead of the Fed’s big announcement on Wednesday.
The benchmark is back at fresh highs as Wall Street looks ahead to lower interest rates and solid tech-driven earnings growth in the back half of 2024 and beyond.
Despite the possibility of more volatility ahead, driven by seasonal weakness and pre-election unknowns, investors should remain exposed to the stock market in September and beyond.
A good jumping-off point is to search for stocks that boast improving earnings outlooks to earn them Zacks Rank #1 (Strong Buys) that are also efficiently generating profits.
Return on Equity 101
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 eight stocks that made it through today’s screen…
Time to Buy HNI Stock?
HNI Corporation (HNI - Free Report) makes commercial furnishings and building products. HNI operates its workplace furnishings segment under multiple brands. Meanwhile, its residential building products segment is comprised of gas, electric, wood, and pellet-burning fireplaces, inserts, stoves, facings, and accessories. HNI operates 27 industry-leading brands across its various end markets.
HNI has crushed our bottom-line estimates by 51% in the trailing four quarters. Better yet, HNI continues to boost its bottom-line outlook even as the U.S. economy slows.
HNI said the firm’s “profit transformation initiatives and the Kimball International acquisition continue to deliver strong earnings growth in the Workplace Furnishings segment.” HNI’s chief executive said the company remains bullish about the long-term prospects for the housing market and its ability to thrive as a market leader.
Image Source: Zacks Investment Research
HNI is projected to grow its adjusted earnings by 20% in 2024 and another 25% next year to jump from $2.65 a share in FY23 to $3.95 per share in FY25. HNI’s upbeat earnings estimates help it land its Zacks Rank #1 (Strong Buy). On top of that, its Return on Equity sits at 19.2%.
HNI shares have climbed by 62% in the last year, including a 22% jump in the trailing three months. HNI stock might be ready to break out to new all-time highs if it can regain momentum following its recent pullback. HNI’s dividend yields 2.5% 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
How to Find "Strong Buy" Stocks Efficiently Generating Profits
The S&P 500 touched a new record on Tuesday morning ahead of the Fed’s big announcement on Wednesday.
The benchmark is back at fresh highs as Wall Street looks ahead to lower interest rates and solid tech-driven earnings growth in the back half of 2024 and beyond.
Despite the possibility of more volatility ahead, driven by seasonal weakness and pre-election unknowns, investors should remain exposed to the stock market in September and beyond.
A good jumping-off point is to search for stocks that boast improving earnings outlooks to earn them Zacks Rank #1 (Strong Buys) that are also efficiently generating profits.
Return on Equity 101
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 eight stocks that made it through today’s screen…
Time to Buy HNI Stock?
HNI Corporation (HNI - Free Report) makes commercial furnishings and building products. HNI operates its workplace furnishings segment under multiple brands. Meanwhile, its residential building products segment is comprised of gas, electric, wood, and pellet-burning fireplaces, inserts, stoves, facings, and accessories. HNI operates 27 industry-leading brands across its various end markets.
HNI has crushed our bottom-line estimates by 51% in the trailing four quarters. Better yet, HNI continues to boost its bottom-line outlook even as the U.S. economy slows.
HNI said the firm’s “profit transformation initiatives and the Kimball International acquisition continue to deliver strong earnings growth in the Workplace Furnishings segment.” HNI’s chief executive said the company remains bullish about the long-term prospects for the housing market and its ability to thrive as a market leader.
Image Source: Zacks Investment Research
HNI is projected to grow its adjusted earnings by 20% in 2024 and another 25% next year to jump from $2.65 a share in FY23 to $3.95 per share in FY25. HNI’s upbeat earnings estimates help it land its Zacks Rank #1 (Strong Buy). On top of that, its Return on Equity sits at 19.2%.
HNI shares have climbed by 62% in the last year, including a 22% jump in the trailing three months. HNI stock might be ready to break out to new all-time highs if it can regain momentum following its recent pullback. HNI’s dividend yields 2.5% 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: www.zacks.com/performance_disclosure