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.
Find Strong Stocks to Buy for February Using Return on Equity
Read MoreHide Full Article
January marked a tumultuous start to 2022, with the S&P 500 posting its worst month since March 2020. The selling hit most corners of the market, with growth stocks and technology names taking the brunt of the blows, as Wall Street assessed what impact rising interest rates will have on the market and the economy.
The selloff to start the year was brutal for many stocks and many investors. But the significant downturn seemed due after three years of strong market gains. The S&P 500 fell into correction territory (down 10% from its highs), while the Nasdaq was down over 16% at points. Both indexes also slipped beneath their 200-day moving averages for the first time since the initial covid selloff.
The last several sessions have offered signs of optimism, with the S&P 500 now back above its 200-day and the Nasdaq up over 3% in back-to-back sessions on Friday and Monday. Buyers have started to step in to scoop up stocks that were trading at far more reasonable, pre-pandemic valuations.
There could be more selling to come. And some investors might decide to stay on the sidelines given the unknowns of inflation and the Fed’s response. That said, interest rates will have to climb far higher to make equities unappealing. Plus, the outlook for S&P 500 margins, sales, and earnings have proven resilient and historically strong for 2022 and 2023 (also read: The Outlook for Tech Stocks in a Rising Rate Environment).
Investors who want to buy stocks in February and beyond might want to consider adding companies that have proven they can turn assets into profits amid the economic uncertainty…
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 five stocks that made it through today’s screen…
Rocky Brands, Inc. is a designer, manufacturer and marketer of high-quality footwear and apparel, with a focus on work boots and the outdoors. Rocky’s portfolio includes its namesake brand, Georgia Boot, Durango, and other well-known names within the space.
Zacks estimates call for Rocky’s adjusted FY21 adjusted earnings to surged 27% on 84% higher revenue, with double-digit growth expected on both the top and bottom lines in 2022. Rocky Brands stock is up 57% in the last two years to outpace its highly-ranked Shoes and Retail Apparel industry. And Rocky’s 1.5% dividend yield tops its industry’s 0.9% average.
Build-A-Bear Workshop is a well-known seller of stuffed animal toys that boasts roughly 500 interactive brick-and-mortar retail locations. The focus of Build-A-Bear stores is to provide a “hands-on” entertaining experience where consumers help stuff the toys and more. Build-A-Bear also has e-commerce offerings and its expanding portfolio includes entertainment and licensing agreements.
BBW shares have skyrocketed 340% in the last two years and Build-A-Bear has outperformed the market in 2022. Despite the huge run, Build-A-Bear stock, which is trading at around $18.70 per share at the moment, still has tons of room left to climb before it runs into its current Zacks consensus price target of $33.00 a share.
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 to Buy for February Using Return on Equity
January marked a tumultuous start to 2022, with the S&P 500 posting its worst month since March 2020. The selling hit most corners of the market, with growth stocks and technology names taking the brunt of the blows, as Wall Street assessed what impact rising interest rates will have on the market and the economy.
The selloff to start the year was brutal for many stocks and many investors. But the significant downturn seemed due after three years of strong market gains. The S&P 500 fell into correction territory (down 10% from its highs), while the Nasdaq was down over 16% at points. Both indexes also slipped beneath their 200-day moving averages for the first time since the initial covid selloff.
The last several sessions have offered signs of optimism, with the S&P 500 now back above its 200-day and the Nasdaq up over 3% in back-to-back sessions on Friday and Monday. Buyers have started to step in to scoop up stocks that were trading at far more reasonable, pre-pandemic valuations.
There could be more selling to come. And some investors might decide to stay on the sidelines given the unknowns of inflation and the Fed’s response. That said, interest rates will have to climb far higher to make equities unappealing. Plus, the outlook for S&P 500 margins, sales, and earnings have proven resilient and historically strong for 2022 and 2023 (also read: The Outlook for Tech Stocks in a Rising Rate Environment).
Investors who want to buy stocks in February and beyond might want to consider adding companies that have proven they can turn assets into profits amid the economic uncertainty…
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 five stocks that made it through today’s screen…
Rocky Brands (RCKY - Free Report)
Rocky Brands, Inc. is a designer, manufacturer and marketer of high-quality footwear and apparel, with a focus on work boots and the outdoors. Rocky’s portfolio includes its namesake brand, Georgia Boot, Durango, and other well-known names within the space.
Zacks estimates call for Rocky’s adjusted FY21 adjusted earnings to surged 27% on 84% higher revenue, with double-digit growth expected on both the top and bottom lines in 2022. Rocky Brands stock is up 57% in the last two years to outpace its highly-ranked Shoes and Retail Apparel industry. And Rocky’s 1.5% dividend yield tops its industry’s 0.9% average.
Build-A-Bear Workshop, Inc. (BBW - Free Report)
Build-A-Bear Workshop is a well-known seller of stuffed animal toys that boasts roughly 500 interactive brick-and-mortar retail locations. The focus of Build-A-Bear stores is to provide a “hands-on” entertaining experience where consumers help stuff the toys and more. Build-A-Bear also has e-commerce offerings and its expanding portfolio includes entertainment and licensing agreements.
BBW shares have skyrocketed 340% in the last two years and Build-A-Bear has outperformed the market in 2022. Despite the huge run, Build-A-Bear stock, which is trading at around $18.70 per share at the moment, still has tons of room left to climb before it runs into its current Zacks consensus price target of $33.00 a share.
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/