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Find Strong Stocks for November and Beyond with this ROE Screener
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The S&P 500 closed at a record on Monday for the eighth consecutive session. This matched a 1997 streak, and a ninth-straight closing high would be the longest since 1955. All three major U.S. indexes were down through early afternoon trading Tuesday, which could prevent the benchmark from reaching that milestone.
Both the Nasdaq and the Dow also climbed to new records to start the week of November 8. The S&P 500 has now jumped around 9% in the last month, while the Nasdaq had surged roughly 11% since it began to bounce out of oversold technical levels on October 4.
Wall Street remained bullish despite rising prices and supply chain bottlenecks because these headwinds haven’t materialized in the broader S&P 500 margins picture for this year and beyond, at least not yet. Plus, the consumer-driven U.S. economy showed strength in October after slow Q3 GDP growth. This includes last week’s stronger-than-projected jobs data that also featured upwardly-revised figures for August and September.
Investors have also taken in stride the Fed’s plans to begin scaling back its bond-buying this month. The central bank hopes to end its run of stimulus-focused bond purchases by June, while leaving interest rates unchanged during this stretch.
The broader bullish backdrop remains in place as we enter the heart of the holiday season. Yet, the market could be due for a bit of a near-term pullback given the huge month-long run that’s pushed many stocks to overheated technical levels.
Still, investors with long-term horizons should attempt to stay constantly exposed to the market. Today, we look at how to find highly-ranked stocks 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 three 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.
Image: Bigstock
Find Strong Stocks for November and Beyond with this ROE Screener
The S&P 500 closed at a record on Monday for the eighth consecutive session. This matched a 1997 streak, and a ninth-straight closing high would be the longest since 1955. All three major U.S. indexes were down through early afternoon trading Tuesday, which could prevent the benchmark from reaching that milestone.
Both the Nasdaq and the Dow also climbed to new records to start the week of November 8. The S&P 500 has now jumped around 9% in the last month, while the Nasdaq had surged roughly 11% since it began to bounce out of oversold technical levels on October 4.
Wall Street remained bullish despite rising prices and supply chain bottlenecks because these headwinds haven’t materialized in the broader S&P 500 margins picture for this year and beyond, at least not yet. Plus, the consumer-driven U.S. economy showed strength in October after slow Q3 GDP growth. This includes last week’s stronger-than-projected jobs data that also featured upwardly-revised figures for August and September.
Investors have also taken in stride the Fed’s plans to begin scaling back its bond-buying this month. The central bank hopes to end its run of stimulus-focused bond purchases by June, while leaving interest rates unchanged during this stretch.
The broader bullish backdrop remains in place as we enter the heart of the holiday season. Yet, the market could be due for a bit of a near-term pullback given the huge month-long run that’s pushed many stocks to overheated technical levels.
Still, investors with long-term horizons should attempt to stay constantly exposed to the market. Today, we look at how to find highly-ranked stocks 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 three stocks that made it through today’s screen…
Bluegreen Vacations
Super Micro Computer (SMCI - 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/