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Make a Fortune With These 4 High Earnings Yield Picks
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Earnings yield is useful for investors who are concerned about the rate of return on an investment. This metric, expressed in percentage, is calculated as annual earnings per share divided by market price — the inverse of the price-to-earnings (P/E) ratio.
While comparing stocks, if other factors are similar, the one with higher earnings yield is considered undervalued. That’s because this metric measures the anticipated yield (or return) from earnings for each dollar invested in a stock today.
Earnings yield is not as widely used as the P/E ratio as a valuation metric but investors most commonly compare the earnings yield of a stock to the prevailing interest rates, such as the current 10-year Treasury yield, to get a sense of the return on investment it offers compared to virtually risk-free returns.
If the yield on a stock is lower than the 10-year Treasury yield, the stock would be considered overvalued relative to bonds. Conversely, if the yield on the stock is higher, it would be considered undervalued.
Screening Parameters
We have set Earnings Yield greater than 10% as our primary screening criterion but it alone cannot be used for picking stocks that have the potential of generating solid returns. So, we have added the following parameters to the screen:
Estimated EPS growth for the next 12 months greater than or equal to the S&P 500: This metric compares the 12-month forward EPS estimate with the 12-month actual EPS.
Average Daily Volume (20 Day) greater than or equal to 100,000: High trading volume implies that a stock has adequate liquidity.
Below we have highlighted four of the 30 stocks that made it through the screen.
General Motors (GM - Free Report) : Headquartered in Detroit, General Motors is one of the world’s largest automakers. General Motors' hot-selling brands in America like Chevrolet Silverado and Equinox, along with upcoming electric vehicle (EV) launches including GMC Hummer EV and Cadillac Lyriq EV are expected to boost the firm’s prospects. Sporting a Zacks Rank #1, the company has a long-term expected EPS of 9.9%. The Zacks Consensus Estimate for 2021 sales and earnings implies year-over-year growth of 10.2% and 23.9%, respectively.
Winnebago Industries (WGO - Free Report) : This company is one of the leading recreational vehicle makers in the United States, riding on the strength of acquisitions, including Newmar, Grand Design and Chris-Craft.The Zacks Rank #1 firm’s increasing free cash flow and strengthening balance sheet enable it to consistently enhance shareholder value and outperform the marketplace. The Zacks Consensus Estimate for fiscal 2021 sales and earnings implies year-over-year growth of 36.6% and 129.5%, respectively.
Novavax Inc. (NVAX - Free Report) : Gaithersburg-based Novavax is a biotechnology company engaged in developing innovative vaccines to prevent serious infectious diseases. The firm’s efforts to develop influenza vaccine candidate NanoFLu look encouraging. Its COVID-19 vaccine program is also progressing well. Healthy financials of the Zacks Rank #1 company further boosts investors’ confidence. The Zacks Consensus Estimate for 2021 sales and earnings implies year-over-year growth of 645.3% and 421.4%, respectively.
ArcelorMittal (MT - Free Report) : Luxembourg-based ArcelorMittal is the world’s leading steel and mining company. The company remains on track with cost-reduction actions under the Action 2020 program that includes plans to optimize costs and increase steel shipment volumes. The Zacks Rank #1 firm is also focused on shifting to high-added value products — including automotive steel line — that offer growth visibility. The consensus estimate for 2021 sales and earnings implies year-over-year growth of 5.4% and 279%, respectively.
Get the rest of the stocks on the list and start putting this and other ideas to the test. It can all be done with the Research Wizard stock picking and back testing software.
The Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.
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.
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Make a Fortune With These 4 High Earnings Yield Picks
Earnings yield is useful for investors who are concerned about the rate of return on an investment. This metric, expressed in percentage, is calculated as annual earnings per share divided by market price — the inverse of the price-to-earnings (P/E) ratio.
While comparing stocks, if other factors are similar, the one with higher earnings yield is considered undervalued. That’s because this metric measures the anticipated yield (or return) from earnings for each dollar invested in a stock today.
Earnings yield is not as widely used as the P/E ratio as a valuation metric but investors most commonly compare the earnings yield of a stock to the prevailing interest rates, such as the current 10-year Treasury yield, to get a sense of the return on investment it offers compared to virtually risk-free returns.
If the yield on a stock is lower than the 10-year Treasury yield, the stock would be considered overvalued relative to bonds. Conversely, if the yield on the stock is higher, it would be considered undervalued.
Screening Parameters
We have set Earnings Yield greater than 10% as our primary screening criterion but it alone cannot be used for picking stocks that have the potential of generating solid returns. So, we have added the following parameters to the screen:
Estimated EPS growth for the next 12 months greater than or equal to the S&P 500: This metric compares the 12-month forward EPS estimate with the 12-month actual EPS.
Average Daily Volume (20 Day) greater than or equal to 100,000: High trading volume implies that a stock has adequate liquidity.
Current Price greater than or equal to $5.
Buy-Rated Stocks: Stocks with a Zacks Rank #1 (Strong Buy) or 2 (Buy) have been known to outperform peers in any type of market environment. You can see the complete list of today’s Zacks #1 Rank stocks here.
Our Choices
Below we have highlighted four of the 30 stocks that made it through the screen.
General Motors (GM - Free Report) : Headquartered in Detroit, General Motors is one of the world’s largest automakers. General Motors' hot-selling brands in America like Chevrolet Silverado and Equinox, along with upcoming electric vehicle (EV) launches including GMC Hummer EV and Cadillac Lyriq EV are expected to boost the firm’s prospects. Sporting a Zacks Rank #1, the company has a long-term expected EPS of 9.9%. The Zacks Consensus Estimate for 2021 sales and earnings implies year-over-year growth of 10.2% and 23.9%, respectively.
Winnebago Industries (WGO - Free Report) : This company is one of the leading recreational vehicle makers in the United States, riding on the strength of acquisitions, including Newmar, Grand Design and Chris-Craft.The Zacks Rank #1 firm’s increasing free cash flow and strengthening balance sheet enable it to consistently enhance shareholder value and outperform the marketplace. The Zacks Consensus Estimate for fiscal 2021 sales and earnings implies year-over-year growth of 36.6% and 129.5%, respectively.
Novavax Inc. (NVAX - Free Report) : Gaithersburg-based Novavax is a biotechnology company engaged in developing innovative vaccines to prevent serious infectious diseases. The firm’s efforts to develop influenza vaccine candidate NanoFLu look encouraging. Its COVID-19 vaccine program is also progressing well. Healthy financials of the Zacks Rank #1 company further boosts investors’ confidence. The Zacks Consensus Estimate for 2021 sales and earnings implies year-over-year growth of 645.3% and 421.4%, respectively.
ArcelorMittal (MT - Free Report) : Luxembourg-based ArcelorMittal is the world’s leading steel and mining company. The company remains on track with cost-reduction actions under the Action 2020 program that includes plans to optimize costs and increase steel shipment volumes. The Zacks Rank #1 firm is also focused on shifting to high-added value products — including automotive steel line — that offer growth visibility. The consensus estimate for 2021 sales and earnings implies year-over-year growth of 5.4% and 279%, respectively.
Get the rest of the stocks on the list and start putting this and other ideas to the test. It can all be done with the Research Wizard stock picking and back testing software.
The Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.
Click here to sign up for a free trial to the Research Wizard today.
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