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5 Top-Ranked Stocks Displaying High Earnings Yield
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Investors always look for stocks that have good return prospects. As a result, stocks backed by strong earnings potential are preferred, as an impressive earnings report tends to augment a stock's price. In this regard, earnings yield is a very useful tool for investors looking for stocks coming with the promise of comparatively better earnings.
Simply put, earnings yield is the inverse of the price-to-earnings (P/E) ratio. In addition to comparing a stock with others, it can be used to compare a stock with fixed income securities.
Earnings yield is calculated as (Annual Earnings per Share/Market Price) x 100. While comparing similar stocks, the one with higher earnings yield has the potential of providing comparatively greater returns.
Earnings yield can also be used to compare the performance of a market index with the 10-year Treasury yield. For instance, when the yield of the market index is more than the 10-year Treasury yield, stocks can be considered as undervalued than bonds. In this situation, investing in the stock market would be a better option for a value investor.
However, keeping in mind the risk-free nature of T-bills, it would be a good idea to add a risk premium to the Treasury yield while comparing it with the earnings yield of a stock or the stock 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 of generating 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 have highlighted five of the 52 stocks that made it through the screen.
Macy's, Inc. (M - Free Report) : Macy's is an omnichannel retail organization operating stores, websites and mobile applications under three brands - Macy's, Bloomingdale's and Bluemercury. The company has been progressing well with the Polaris strategy, which includes boosting digital capabilities and attaining operating efficiency. The stock currently flaunts a Zacks Rank #1 and has a long-term expected EPS growth rate of 12%.
Adient plc (ADNT - Free Report) : Adient is one of the world’s largest automotive seating suppliers. A diverse customer base, new business wins, restructuring initiatives and turnaround actions are likely to aid the company. The stock presently flaunts a Zacks Rank #1 and has a long-term expected EPS growth rate of 30.1%.
Imperial Oil Limited (IMO - Free Report) : Imperial Oil is one of the largest integrated oil companies of Canada. The Zacks Rank #1 firm’s integrated business model, balance sheet strength and investor-friendly moves boost optimism surrounding the stock. The Zacks Consensus Estimate for 2021 earnings and sales implies year-over-year growth of 464.6% and 64.4%, respectively.
Ryder System, Inc. (R - Free Report) : Ryder, currently sporting a Zacks Rank #1, is recognized as one of the world's largest providers of integrated logistics and transportation solutions. Improving freight market conditions are aiding Ryder’s performance. The firm’s raised 2021 earnings guidance is encouraging. The Zacks Consensus Estimate for 2021 earnings and sales implies year-over-year growth of 2,289% and 6.7%, respectively.
The Chemours Company (CC - Free Report) : Chemours is a leading provider of performance chemicals that are key ingredients in end products and processes across a host of industries. The Zacks Rank #2 firm is benefiting from increasing adoption of the Opteon platform and growing applications of fluoropolymers, especially in automotive, electronics, and energy end markets. Chemours’ cost actions and strong liquidity position are other positives. The stock has a long-term expected EPS growth rate of 26.4%.
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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5 Top-Ranked Stocks Displaying High Earnings Yield
Investors always look for stocks that have good return prospects. As a result, stocks backed by strong earnings potential are preferred, as an impressive earnings report tends to augment a stock's price. In this regard, earnings yield is a very useful tool for investors looking for stocks coming with the promise of comparatively better earnings.
Simply put, earnings yield is the inverse of the price-to-earnings (P/E) ratio. In addition to comparing a stock with others, it can be used to compare a stock with fixed income securities.
Earnings yield is calculated as (Annual Earnings per Share/Market Price) x 100. While comparing similar stocks, the one with higher earnings yield has the potential of providing comparatively greater returns.
Earnings yield can also be used to compare the performance of a market index with the 10-year Treasury yield. For instance, when the yield of the market index is more than the 10-year Treasury yield, stocks can be considered as undervalued than bonds. In this situation, investing in the stock market would be a better option for a value investor.
However, keeping in mind the risk-free nature of T-bills, it would be a good idea to add a risk premium to the Treasury yield while comparing it with the earnings yield of a stock or the stock 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 of generating 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 Choices
Below we have highlighted five of the 52 stocks that made it through the screen.
Macy's, Inc. (M - Free Report) : Macy's is an omnichannel retail organization operating stores, websites and mobile applications under three brands - Macy's, Bloomingdale's and Bluemercury. The company has been progressing well with the Polaris strategy, which includes boosting digital capabilities and attaining operating efficiency. The stock currently flaunts a Zacks Rank #1 and has a long-term expected EPS growth rate of 12%.
Adient plc (ADNT - Free Report) : Adient is one of the world’s largest automotive seating suppliers. A diverse customer base, new business wins, restructuring initiatives and turnaround actions are likely to aid the company. The stock presently flaunts a Zacks Rank #1 and has a long-term expected EPS growth rate of 30.1%.
Imperial Oil Limited (IMO - Free Report) : Imperial Oil is one of the largest integrated oil companies of Canada. The Zacks Rank #1 firm’s integrated business model, balance sheet strength and investor-friendly moves boost optimism surrounding the stock. The Zacks Consensus Estimate for 2021 earnings and sales implies year-over-year growth of 464.6% and 64.4%, respectively.
Ryder System, Inc. (R - Free Report) : Ryder, currently sporting a Zacks Rank #1, is recognized as one of the world's largest providers of integrated logistics and transportation solutions. Improving freight market conditions are aiding Ryder’s performance. The firm’s raised 2021 earnings guidance is encouraging. The Zacks Consensus Estimate for 2021 earnings and sales implies year-over-year growth of 2,289% and 6.7%, respectively.
The Chemours Company (CC - Free Report) : Chemours is a leading provider of performance chemicals that are key ingredients in end products and processes across a host of industries. The Zacks Rank #2 firm is benefiting from increasing adoption of the Opteon platform and growing applications of fluoropolymers, especially in automotive, electronics, and energy end markets. Chemours’ cost actions and strong liquidity position are other positives. The stock has a long-term expected EPS growth rate of 26.4%.
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