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Improve Your Portfolio for December with this ROE Stock Screener
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The market is coming off an impressive November that saw the S&P 500 climb 11% and the Dow post its strongest month since the late 1980s, up 12%. Perhaps more importantly, last month’s rally finally expanded outside of the usual suspects that soared during the coronavirus economy.
The strong showing follows a string of bullish signals on Wall Street, from positive vaccine news to the improving earnings outlook and economic comeback. Let’s also remember that both the S&P 500’s earnings picture and the economic growth in the U.S. were happening well before the vaccine announcements.
The Pfizer and Moderna news simply took things further and has investors hoping that the hard hit-industries such as energy, as well as travel and leisure will be able to mount a comeback of their own in 2021. On top of all of this, the Fed is set to keep its interest rate near zero through at least 2023. This should provide a boost to the market, as Wall Street lives in a constant state of there is no alternative investing.
All of this doesn’t mean that investors should simply dive into every beaten-down stock. Instead, it is likely best to find stocks that don’t need to bank on a vaccine and boast solid fundamentals during these still-uncertain times.
With this in mind, we searched for stocks by utilizing one of the fastest and best gauges of how effectively management runs a company...
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 four stocks that made it through today’s screen…
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.
Now would you like to screen for the latest stocks from Zacks' most successful strategies? From 2017 through Q2 2020, while the market gained +44.0%, we saw results like these: Big Money Zacks +93.8%, Technical Analysis and Fundamental Analysis +122.2%, New Highs +153.0%, and Filtered Zacks Rank5 +156.8%.
You're invited to screen the latest stocks in seconds by trying Zacks' Research Wizard stock-picking program. Or use the Wizard to create your own market-beating strategies. No credit card needed, no cost or obligation.
Image: Bigstock
Improve Your Portfolio for December with this ROE Stock Screener
The market is coming off an impressive November that saw the S&P 500 climb 11% and the Dow post its strongest month since the late 1980s, up 12%. Perhaps more importantly, last month’s rally finally expanded outside of the usual suspects that soared during the coronavirus economy.
The strong showing follows a string of bullish signals on Wall Street, from positive vaccine news to the improving earnings outlook and economic comeback. Let’s also remember that both the S&P 500’s earnings picture and the economic growth in the U.S. were happening well before the vaccine announcements.
The Pfizer and Moderna news simply took things further and has investors hoping that the hard hit-industries such as energy, as well as travel and leisure will be able to mount a comeback of their own in 2021. On top of all of this, the Fed is set to keep its interest rate near zero through at least 2023. This should provide a boost to the market, as Wall Street lives in a constant state of there is no alternative investing.
All of this doesn’t mean that investors should simply dive into every beaten-down stock. Instead, it is likely best to find stocks that don’t need to bank on a vaccine and boast solid fundamentals during these still-uncertain times.
With this in mind, we searched for stocks by utilizing one of the fastest and best gauges of how effectively management runs a company...
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 four stocks that made it through today’s screen…
Turtle Beach Corporation (HEAR - Free Report)
Aviat Networks, Inc. (AVNW - Free Report)
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/
Today's Stocks from Zacks' Best Screens
Now would you like to screen for the latest stocks from Zacks' most successful strategies? From 2017 through Q2 2020, while the market gained +44.0%, we saw results like these: Big Money Zacks +93.8%, Technical Analysis and Fundamental Analysis +122.2%, New Highs +153.0%, and Filtered Zacks Rank5 +156.8%.
You're invited to screen the latest stocks in seconds by trying Zacks' Research Wizard stock-picking program. Or use the Wizard to create your own market-beating strategies. No credit card needed, no cost or obligation.
Try it for 2 weeks free >>