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Place Your Bets on These High Earnings Yield Picks
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The importance of financial parameters in making a prudent investing decision is undeniable. When you are not able to decide whether to invest in stocks or bonds, you can take the help of some key financial metrics. One such metric that assists investors in making correct decisions is earnings yield. It is the reciprocal of the price-to-earnings (P/E) ratio. In fact, this ratio is very useful for tracking undervalued stocks. It also comes in handy for comparing stocks with the market or fixed income securities.
Earnings yield can be computed as (Annual Earnings per Share/Market Price) x 100. This is used for comparing stocks from the same sector or industry. A stock with higher earnings yield is likely to produce better returns.
For the purpose of comparing the performance of a market index with the 10-year Treasury yield, this ratio is also very useful. When the yield of the market index is higher than the 10-year Treasury yield, the stocks can be considered as undervalued in comparison to bonds. This indicates that investing in the stock market is a better option for a value investor.
Investment in Treasury-bill is not fraught with risks. However, investing in stocks always comes with a caveat. Hence, it is a good idea to add a risk premium to Treasury yield while comparing it with the earnings yield of a stock or the broader market.
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 to generate 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 highlight five of the 43 stocks that made it through the screen.
Citizens Financial Group Inc. (CFG - Free Report) operates as the bank holding company for Citizens Bank, National Association that provides retail and commercial banking products, as well as services in the United States. The company is benefiting from growing loans and deposits. Also, its focus on revenues and efficiency initiatives is a tailwind. Further, a strong capital position enables growth through acquisitions. This Zacks Rank #1 firm has an expected earnings growth rate of 53.5% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 20.5% over the past 30 days.
Royal Dutch Shell : Netherlands-based Shell is an integrated oil and gas major. The company’s position as a leading liquefied natural gas producer — thanks to the BG acquisition — should help it meet the fuel’s growing demand, and boost top as well as bottom-line growth. Shell’s cost-containment efforts and green energy targets are praiseworthy. This Zacks Rank #1 firm has an expected earnings growth rate of 163.7% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 12.7% over the past 30 days.
Meritor, Inc. : Michigan-based Meritor is an automotive parts manufacturer and supplier. The company's electric powertrain represents a game-changing technology for commercial vehicles and ensures that electrification revenues continue to get a boost in the future. This Zacks Rank #1 firm is on track to achieve M2022 goals that focus on new business opportunities, margin expansion and cost-containment efforts. The Zacks Consensus Estimate for fiscal 2021 earnings and sales implies year-over-year growth of 121.4% and 23.2%, respectively.
Winnebago Industries (WGO - Free Report) : Winnebago is one of the leading producers of recreational vehicles in the United States. This Zacks Rank #2 company has been riding on strength of its acquisitions, including Newmar, Grand Design and Chris-Craft. Winnebago’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 earnings and sales implies year-over-year growth of 129.5% and 36.6%, respectively.
Signet Jewelers Limited (SIG - Free Report) is a retailer of diamond jewelry, watches and other products.Signet is progressing well with the ‘Path to Brilliance’ Plan, which focuses on customer-centric approach, omni-channel growth and cost-saving actions. The company currently carries a Zacks Rank #2. Signet boasts an impressive surprise history, with earnings topping estimates in each of the trailing four quarters, with an average of 50.1%. The Zacks Consensus Estimate for fiscal 2022 earnings and sales implies year-over-year growth of 181.5% and 10.5%, respectively.
You can get the rest of the stocks on this list by signing up now for a 2-week free trial to the Research Wizard stock picking and backtesting software. You can also create your own strategies and test them first before making investments.
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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Place Your Bets on These High Earnings Yield Picks
The importance of financial parameters in making a prudent investing decision is undeniable. When you are not able to decide whether to invest in stocks or bonds, you can take the help of some key financial metrics. One such metric that assists investors in making correct decisions is earnings yield. It is the reciprocal of the price-to-earnings (P/E) ratio. In fact, this ratio is very useful for tracking undervalued stocks. It also comes in handy for comparing stocks with the market or fixed income securities.
Earnings yield can be computed as (Annual Earnings per Share/Market Price) x 100. This is used for comparing stocks from the same sector or industry. A stock with higher earnings yield is likely to produce better returns.
For the purpose of comparing the performance of a market index with the 10-year Treasury yield, this ratio is also very useful. When the yield of the market index is higher than the 10-year Treasury yield, the stocks can be considered as undervalued in comparison to bonds. This indicates that investing in the stock market is a better option for a value investor.
Investment in Treasury-bill is not fraught with risks. However, investing in stocks always comes with a caveat. Hence, it is a good idea to add a risk premium to Treasury yield while comparing it with the earnings yield of a stock or the broader market.
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 to generate 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.
Winning Bets
Below we highlight five of the 43 stocks that made it through the screen.
Citizens Financial Group Inc. (CFG - Free Report) operates as the bank holding company for Citizens Bank, National Association that provides retail and commercial banking products, as well as services in the United States. The company is benefiting from growing loans and deposits. Also, its focus on revenues and efficiency initiatives is a tailwind. Further, a strong capital position enables growth through acquisitions. This Zacks Rank #1 firm has an expected earnings growth rate of 53.5% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 20.5% over the past 30 days.
Royal Dutch Shell : Netherlands-based Shell is an integrated oil and gas major. The company’s position as a leading liquefied natural gas producer — thanks to the BG acquisition — should help it meet the fuel’s growing demand, and boost top as well as bottom-line growth. Shell’s cost-containment efforts and green energy targets are praiseworthy. This Zacks Rank #1 firm has an expected earnings growth rate of 163.7% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 12.7% over the past 30 days.
Meritor, Inc. : Michigan-based Meritor is an automotive parts manufacturer and supplier. The company's electric powertrain represents a game-changing technology for commercial vehicles and ensures that electrification revenues continue to get a boost in the future. This Zacks Rank #1 firm is on track to achieve M2022 goals that focus on new business opportunities, margin expansion and cost-containment efforts. The Zacks Consensus Estimate for fiscal 2021 earnings and sales implies year-over-year growth of 121.4% and 23.2%, respectively.
Winnebago Industries (WGO - Free Report) : Winnebago is one of the leading producers of recreational vehicles in the United States. This Zacks Rank #2 company has been riding on strength of its acquisitions, including Newmar, Grand Design and Chris-Craft. Winnebago’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 earnings and sales implies year-over-year growth of 129.5% and 36.6%, respectively.
Signet Jewelers Limited (SIG - Free Report) is a retailer of diamond jewelry, watches and other products.Signet is progressing well with the ‘Path to Brilliance’ Plan, which focuses on customer-centric approach, omni-channel growth and cost-saving actions. The company currently carries a Zacks Rank #2. Signet boasts an impressive surprise history, with earnings topping estimates in each of the trailing four quarters, with an average of 50.1%. The Zacks Consensus Estimate for fiscal 2022 earnings and sales implies year-over-year growth of 181.5% and 10.5%, respectively.
You can get the rest of the stocks on this list by signing up now for a 2-week free trial to the Research Wizard stock picking and backtesting software. You can also create your own strategies and test them first before making investments.
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