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.
How to Find 'Strong Buy' Stocks that Efficiently Generate Profits
Read MoreHide Full Article
Wall Street started a holiday-shortened trading week by selling stocks following a wave of bullishness. The S&P 500 and the Nasdaq are still floating near fresh 52-week highs on Tuesday, and the benchmark has already surged above levels that the big money has been closely monitoring.
Through morning trading on Tuesday, the S&P 500 traded above 4,300, which is viewed as a potentially critical level since it marked the highs following the big summer 2022 rally. Yet investors shouldn’t be too surprised if the stock market experiences more profit-taking as we near the end of the second quarter and the start of the traditionally quiet Wall Street summer.
The mega-cap tech stocks that have climbed over 40% or more are likely due for a healthy pullback, which could drag down index levels. Thankfully, after a very top-heavy rally, we are finally seeing other areas of the market start to rebound.
Money is also coming in off the sidelines as investors big and small look for ways to capitalize on a rally that many missed out on so far. Plus, any significant big tech pullback might be gobbled up rather quickly because funds that failed to benefit from the last tech rally can’t afford to get left behind again.
Given this backdrop, investors likely want to continue hunting for strong stocks to buy in June and the start July, while not ‘chasing’ too many big names that have already skyrocketed.
Today we explore how to search for ‘Strong Buy’ stocks with proven records of efficiently generating profits with this return on equity screen.
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 is one of the six stocks that made it through today’s screen…
Griffon Corporation is a diversified management and holding company that conducts business through wholly-owned subsidiaries. Griffon’s Consumer and Professional Products unit includes branded consumer and professional tools, as well as residential, industrial and commercial fans, home storage and organization products, and more. GFF's Home and Building Products division features garage doors, rolling steel doors, and beyond.
Griffon topped our Q2 financial estimates in early May, crushing our adjusted EPS estimate by 78%. GFF’s earnings outlook has soared for both fiscal 2023 and fiscal 2024, which is part of a long-standing trend of significant upward earnings revisions.
GFF shares have crushed the market over the last 10 years and the past 12 months, with Griffon up 40% vs. 17% for the S&P 500.
Griffon dividend yields 1.3% at the moment, and it trades 22% below its average Zacks price target. Plus, GFF sports a ROE of roughly 41% to blow away its industry’s 12% average.
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
How to Find 'Strong Buy' Stocks that Efficiently Generate Profits
Wall Street started a holiday-shortened trading week by selling stocks following a wave of bullishness. The S&P 500 and the Nasdaq are still floating near fresh 52-week highs on Tuesday, and the benchmark has already surged above levels that the big money has been closely monitoring.
Through morning trading on Tuesday, the S&P 500 traded above 4,300, which is viewed as a potentially critical level since it marked the highs following the big summer 2022 rally. Yet investors shouldn’t be too surprised if the stock market experiences more profit-taking as we near the end of the second quarter and the start of the traditionally quiet Wall Street summer.
The mega-cap tech stocks that have climbed over 40% or more are likely due for a healthy pullback, which could drag down index levels. Thankfully, after a very top-heavy rally, we are finally seeing other areas of the market start to rebound.
Money is also coming in off the sidelines as investors big and small look for ways to capitalize on a rally that many missed out on so far. Plus, any significant big tech pullback might be gobbled up rather quickly because funds that failed to benefit from the last tech rally can’t afford to get left behind again.
Given this backdrop, investors likely want to continue hunting for strong stocks to buy in June and the start July, while not ‘chasing’ too many big names that have already skyrocketed.
Today we explore how to search for ‘Strong Buy’ stocks with proven records of efficiently generating profits with this return on equity screen.
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 is one of the six stocks that made it through today’s screen…
Griffon ((GFF - Free Report) )
Griffon Corporation is a diversified management and holding company that conducts business through wholly-owned subsidiaries. Griffon’s Consumer and Professional Products unit includes branded consumer and professional tools, as well as residential, industrial and commercial fans, home storage and organization products, and more. GFF's Home and Building Products division features garage doors, rolling steel doors, and beyond.
Griffon topped our Q2 financial estimates in early May, crushing our adjusted EPS estimate by 78%. GFF’s earnings outlook has soared for both fiscal 2023 and fiscal 2024, which is part of a long-standing trend of significant upward earnings revisions.
GFF shares have crushed the market over the last 10 years and the past 12 months, with Griffon up 40% vs. 17% for the S&P 500.
Griffon dividend yields 1.3% at the moment, and it trades 22% below its average Zacks price target. Plus, GFF sports a ROE of roughly 41% to blow away its industry’s 12% average.
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/