We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
5 Stocks With High Earnings Yield for Superior Returns
Read MoreHide Full Article
Investors always look for stocks that can deliver handsome returns. As a result, stocks backed by strong earnings potential are preferred, as an impressive earnings report tends to augment a stock's price. In this regard, earnings yield is a very useful tool for investors looking for stocks with the potential of delivering comparatively improved earnings.
Simply put, earnings yield is the inverse of the price-to-earnings (P/E) ratio. In addition to comparing a stock with others, it can be used to compare a stock with fixed income securities.
Earnings yield is calculated as (Annual Earnings per Share/Market Price) x 100. While comparing similar stocks, the one with higher earnings yield has the potential of providing comparatively greater returns.
Earnings yield can also be used to compare the performance of a market index with the 10-year Treasury yield. For instance, when the yield of the market index is more than the 10-year Treasury yield, stocks can be considered as undervalued than bonds. In this situation, investing in the stock market would be a better option for a value investor.
However, keeping in mind the risk-free nature of T-bills, it would be a good idea to add a risk premium to the Treasury yield while comparing it with the earnings yield of a stock or the stock market.
The Winning Strategy
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 five of the 39 stocks that made it through the screen.
Alcoa Corp. (AA - Free Report) : Alcoa is a global industry leader in bauxite, alumina and aluminum products. The firm currently sports a Zacks Rank #1 and has a VGM Score of A. The Zacks Consensus Estimate for 2021 sales and earnings implies year-over-year growth of 11% and 387%, respectively. The company is poised to benefit from enhanced productivity, inorganic growth and strategic initiatives.
USA Truck, Inc. : USA Truck offers motor carrier and logistics services throughout North America. The firm currently has a Zacks Rank #1 and a VGM Score of A. The consensus estimate for 2021 and 2022 earnings implies year-over-year growth of 169% and 10%, respectively. Improved operational efficiency, network refinement and cost-containment efforts should continue to drive the company’s performance. Additionally, higher demand for its services amid tight truck supply are helping it realize better rates.
G-III Apparel Group, Ltd (GIII - Free Report) : G-III Apparel is a manufacturer, designer, and distributor of apparel as well as accessories under licensed, owned, along with private label brands. This Zacks Rank #1 company — carrying a VGM Score of A — is set to ride on global power brands such as DKNY, Donna Karan, Calvin Klein, Tommy Hilfiger and Karl Lagerfeld. The digital business also continues to exhibit strength. The consensus estimate for 2021 and 2022 earnings implies year-over-year growth of 236% and 15%, respectively.
Micron Technology, Inc. (MU - Free Report) : Idaho-based Micron Technology has established itself as one of the leading worldwide providers of semiconductor memory solutions. Digitization across industries, increased uptake of cloud computing and services, acceleration in 5G adoption, along with integration of AI and machine learnings are likely to fuel demand for this Zacks Rank #1 company’s chips. The consensus estimate for fiscal 2021 and 2022 earnings implies year-over-year growth of 68% and 99%, respectively.
Moderna, Inc. (MRNA - Free Report) : This Zacks Rank #2 clinical-stage pharmaceutical company is primarily focused on discovering and developing messenger RNA (mRNA)-based therapies. Moderna has several promising mRNA-based pipeline candidates in its portfolio. Moreover, coronavirus vaccine development is encouraging. The company’s favorable debt profile is also promising. The consensus estimate for 2021 sales and earnings implies year-over-year growth of 1,991% and 1,259%, 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.
Image: Bigstock
5 Stocks With High Earnings Yield for Superior Returns
Investors always look for stocks that can deliver handsome returns. As a result, stocks backed by strong earnings potential are preferred, as an impressive earnings report tends to augment a stock's price. In this regard, earnings yield is a very useful tool for investors looking for stocks with the potential of delivering comparatively improved earnings.
Simply put, earnings yield is the inverse of the price-to-earnings (P/E) ratio. In addition to comparing a stock with others, it can be used to compare a stock with fixed income securities.
Earnings yield is calculated as (Annual Earnings per Share/Market Price) x 100. While comparing similar stocks, the one with higher earnings yield has the potential of providing comparatively greater returns.
Earnings yield can also be used to compare the performance of a market index with the 10-year Treasury yield. For instance, when the yield of the market index is more than the 10-year Treasury yield, stocks can be considered as undervalued than bonds. In this situation, investing in the stock market would be a better option for a value investor.
However, keeping in mind the risk-free nature of T-bills, it would be a good idea to add a risk premium to the Treasury yield while comparing it with the earnings yield of a stock or the stock market.
The Winning Strategy
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 five of the 39 stocks that made it through the screen.
Alcoa Corp. (AA - Free Report) : Alcoa is a global industry leader in bauxite, alumina and aluminum products. The firm currently sports a Zacks Rank #1 and has a VGM Score of A. The Zacks Consensus Estimate for 2021 sales and earnings implies year-over-year growth of 11% and 387%, respectively. The company is poised to benefit from enhanced productivity, inorganic growth and strategic initiatives.
USA Truck, Inc. : USA Truck offers motor carrier and logistics services throughout North America. The firm currently has a Zacks Rank #1 and a VGM Score of A. The consensus estimate for 2021 and 2022 earnings implies year-over-year growth of 169% and 10%, respectively. Improved operational efficiency, network refinement and cost-containment efforts should continue to drive the company’s performance. Additionally, higher demand for its services amid tight truck supply are helping it realize better rates.
G-III Apparel Group, Ltd (GIII - Free Report) : G-III Apparel is a manufacturer, designer, and distributor of apparel as well as accessories under licensed, owned, along with private label brands. This Zacks Rank #1 company — carrying a VGM Score of A — is set to ride on global power brands such as DKNY, Donna Karan, Calvin Klein, Tommy Hilfiger and Karl Lagerfeld. The digital business also continues to exhibit strength. The consensus estimate for 2021 and 2022 earnings implies year-over-year growth of 236% and 15%, respectively.
Micron Technology, Inc. (MU - Free Report) : Idaho-based Micron Technology has established itself as one of the leading worldwide providers of semiconductor memory solutions. Digitization across industries, increased uptake of cloud computing and services, acceleration in 5G adoption, along with integration of AI and machine learnings are likely to fuel demand for this Zacks Rank #1 company’s chips. The consensus estimate for fiscal 2021 and 2022 earnings implies year-over-year growth of 68% and 99%, respectively.
Moderna, Inc. (MRNA - Free Report) : This Zacks Rank #2 clinical-stage pharmaceutical company is primarily focused on discovering and developing messenger RNA (mRNA)-based therapies. Moderna has several promising mRNA-based pipeline candidates in its portfolio. Moreover, coronavirus vaccine development is encouraging. The company’s favorable debt profile is also promising. The consensus estimate for 2021 sales and earnings implies year-over-year growth of 1,991% and 1,259%, 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