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.
These High Earnings Yield Stocks Could Yield Huge Returns
Read MoreHide Full Article
Investors often use P/E ratio and other valuation metrics while picking undervalued stocks with solid upside potential. However, it is difficult to use the P/E ratio to compare stocks with fixed income securities. This is where earnings yield comes handy.
Earnings yield is calculated as (Annual Earnings per Share/Market Price) x 100. In other words, it is the inverse of the P/E ratio.
Other things remaining constant, a stock with higher earnings yield has the potential of providing comparatively greater returns. This metric is used to compare the performance of a market index with the 10-year Treasury yield as well.
For instance, if the yield of the market index is more than the 10-year Treasury, stocks can be considered as undervalued in comparison to bonds. In such a case, investing in the stock market would be a better option for a value investor.
However, given the risk-free nature of T-bills, it would be prudent to add a risk premium to their yield while comparing with a stock or the market index.
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.
Here are five of the 36 stocks that made it through the screen:
LG Display Co., Ltd. (LPL - Free Report) : This South-Korea based firm manufactures and sells thin film transistor liquid crystal and organic light emitting diode display panels. The stock currently sports a Zacks Rank #1 and has a Value Score of A. The company’s expected EPS growth rate for the next three to five years is 32.6%.
Dow Inc. (DOW - Free Report) : Based in Michigan, Dow is a material science company that provides a world-class portfolio of advanced, sustainable and leading-edge products. Its expected EPS growth rate for the next three to five years is 27.7%. Dow presently flaunts a Zacks Rank #1 and has a Value Score of B.
Eagle Bulk Shipping Inc. : This Zacks Rank #1 company engages in ocean transportation of dry bulk cargoes across the world. The Zacks Consensus Estimate for the- firm’s 2021 earnings and sales implies year-over-year growth of 238.5% and 72.2%, respectively.
Hancock Whitney Corporation (HWC - Free Report) : This bank holding company has a Zacks Rank #1 and a VGM Score of B. The company’s expected EPS growth rate for the next three to five years is 8%.
Franchise Group, Inc. : U.S.-based Franchise Group operates as a retailer, franchisor operator and acquirer of franchised as well as franchisable businesses. The company, which carries a Zacks Rank #2 and a Value Score of B, has a long-term expected EPS growth rate of 15%.
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.
Image: Shutterstock
These High Earnings Yield Stocks Could Yield Huge Returns
Investors often use P/E ratio and other valuation metrics while picking undervalued stocks with solid upside potential. However, it is difficult to use the P/E ratio to compare stocks with fixed income securities. This is where earnings yield comes handy.
Earnings yield is calculated as (Annual Earnings per Share/Market Price) x 100. In other words, it is the inverse of the P/E ratio.
Other things remaining constant, a stock with higher earnings yield has the potential of providing comparatively greater returns. This metric is used to compare the performance of a market index with the 10-year Treasury yield as well.
For instance, if the yield of the market index is more than the 10-year Treasury, stocks can be considered as undervalued in comparison to bonds. In such a case, investing in the stock market would be a better option for a value investor.
However, given the risk-free nature of T-bills, it would be prudent to add a risk premium to their yield while comparing with a stock or the market index.
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.
Our Picks
Here are five of the 36 stocks that made it through the screen:
LG Display Co., Ltd. (LPL - Free Report) : This South-Korea based firm manufactures and sells thin film transistor liquid crystal and organic light emitting diode display panels. The stock currently sports a Zacks Rank #1 and has a Value Score of A. The company’s expected EPS growth rate for the next three to five years is 32.6%.
Dow Inc. (DOW - Free Report) : Based in Michigan, Dow is a material science company that provides a world-class portfolio of advanced, sustainable and leading-edge products. Its expected EPS growth rate for the next three to five years is 27.7%. Dow presently flaunts a Zacks Rank #1 and has a Value Score of B.
Eagle Bulk Shipping Inc. : This Zacks Rank #1 company engages in ocean transportation of dry bulk cargoes across the world. The Zacks Consensus Estimate for the- firm’s 2021 earnings and sales implies year-over-year growth of 238.5% and 72.2%, respectively.
Hancock Whitney Corporation (HWC - Free Report) : This bank holding company has a Zacks Rank #1 and a VGM Score of B. The company’s expected EPS growth rate for the next three to five years is 8%.
Franchise Group, Inc. : U.S.-based Franchise Group operates as a retailer, franchisor operator and acquirer of franchised as well as franchisable businesses. The company, which carries a Zacks Rank #2 and a Value Score of B, has a long-term expected EPS growth rate of 15%.
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.