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Find Great Stocks to Buy that are Efficiently Generating Profits
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The S&P 500 is trading at new highs as Wall Street waits for the tech giants to start reporting their quarterly earnings results and offer insights into the state of the U.S. and global economies in the first quarter of 2024.
Some are worried that the rally has been too top-heavy, driven by huge gains from mega-cap tech and the Magnificent 7 alone. Thankfully, far more areas are participating, with eight of the 11 S&P 500 sectors in the green over the last 12 months. Better yet, every sector outside of Energy has climbed solidly during the past three months.
As long as the outlook for Q1 2024 earnings holds up reasonably well and inflation doesn’t tick higher, the bulls should be able to remain in control. On top of that, any selling that pushes the S&P 500 and the Nasdaq down to key moving averages could be scooped up rather quickly as investors of all shapes and sizes make sure they don’t get left behind on any prolonged 2024 rally.
Still, investors must do their due diligence and look for stocks that are poised to outperform. Let’s explore how to find Zacks Rank #1 (Strong Buy) stocks with proven track records of efficiently generating profits that investors might want to buy in 2024.
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 four stocks that made it through today’s screen…
Arcos Dorados boasts a Return on Equity rate of 49%, blowing away its Retail – Restaurants industry’s 3.3% average. Arcos Dorados is the world’s largest independent McDonald’s ((MCD - Free Report) ) franchisee and its dividend yields roughly 1.3% right now.
Image Source: Zacks Investment Research
Arcos Dorados runs the biggest quick-service restaurant chain in Latin America and the Caribbean, operating over 2,300 restaurants. Plus, Arcos Dorados has the exclusive right to own, operate, and grant franchises of McDonald’s restaurants in 20 Latin American and Caribbean countries and territories.
Arcos Dorados crushed our Q3 FY23 earnings estimate by 50% in November. On top of that, the firm’s upbeat bottom line guidance helps it land a Zacks Rank #1 (Strong Buy).
The more recent positivity is part of an extended stretch of upward earnings revisions over the last two years for Arcos Dorados. ARCO’s adjusted earnings are projected to soar 19% in FY23 and another 16% in FY24 on the back of 19% and 11% stronger revenue.
Image Source: Zacks Investment Research
Arcos Dorados stock has surged by over 40% in the past 12 months to double the S&P 500 and crush its industry’s 4% climb. ARCO shares are now up 46% during the last five years to outpace its industry and the broader Zacks Retail-Wholesale Sector. Valuation-wise, ARCO trades at a roughly 45% discount to its industry, its sector, and McDonald’s at 12.8X forward 12-month earnings.
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 Great Stocks to Buy that are Efficiently Generating Profits
The S&P 500 is trading at new highs as Wall Street waits for the tech giants to start reporting their quarterly earnings results and offer insights into the state of the U.S. and global economies in the first quarter of 2024.
Some are worried that the rally has been too top-heavy, driven by huge gains from mega-cap tech and the Magnificent 7 alone. Thankfully, far more areas are participating, with eight of the 11 S&P 500 sectors in the green over the last 12 months. Better yet, every sector outside of Energy has climbed solidly during the past three months.
As long as the outlook for Q1 2024 earnings holds up reasonably well and inflation doesn’t tick higher, the bulls should be able to remain in control. On top of that, any selling that pushes the S&P 500 and the Nasdaq down to key moving averages could be scooped up rather quickly as investors of all shapes and sizes make sure they don’t get left behind on any prolonged 2024 rally.
Still, investors must do their due diligence and look for stocks that are poised to outperform. Let’s explore how to find Zacks Rank #1 (Strong Buy) stocks with proven track records of efficiently generating profits that investors might want to buy in 2024.
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 four stocks that made it through today’s screen…
Arcos Dorados Holdings Inc. ((ARCO - Free Report) )
Arcos Dorados boasts a Return on Equity rate of 49%, blowing away its Retail – Restaurants industry’s 3.3% average. Arcos Dorados is the world’s largest independent McDonald’s ((MCD - Free Report) ) franchisee and its dividend yields roughly 1.3% right now.
Image Source: Zacks Investment Research
Arcos Dorados runs the biggest quick-service restaurant chain in Latin America and the Caribbean, operating over 2,300 restaurants. Plus, Arcos Dorados has the exclusive right to own, operate, and grant franchises of McDonald’s restaurants in 20 Latin American and Caribbean countries and territories.
Arcos Dorados crushed our Q3 FY23 earnings estimate by 50% in November. On top of that, the firm’s upbeat bottom line guidance helps it land a Zacks Rank #1 (Strong Buy).
The more recent positivity is part of an extended stretch of upward earnings revisions over the last two years for Arcos Dorados. ARCO’s adjusted earnings are projected to soar 19% in FY23 and another 16% in FY24 on the back of 19% and 11% stronger revenue.
Image Source: Zacks Investment Research
Arcos Dorados stock has surged by over 40% in the past 12 months to double the S&P 500 and crush its industry’s 4% climb. ARCO shares are now up 46% during the last five years to outpace its industry and the broader Zacks Retail-Wholesale Sector. Valuation-wise, ARCO trades at a roughly 45% discount to its industry, its sector, and McDonald’s at 12.8X forward 12-month earnings.
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: www.zacks.com/performance_disclosure