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.
Boost Your Returns With These 5 High Earnings Yield Stocks
Read MoreHide Full Article
Investors often use the P/E ratio and other valuation metrics to pick undervalued stocks with solid upside potential. One can also use another interesting ratio. Earnings yield, expressed in percentage, is calculated as (Annual Earnings per Share/Market Price) x 100. While comparing stocks, if other factors are similar, investors can look out for stocks with higher earnings yield. This is because stocks with higher earnings yield have the potential of providing comparatively greater returns. Crocs (CROX - Free Report) , Sonic Automotive (SAH - Free Report) , Pfizer (PFE - Free Report) , ExxonMobil Corporation (XOM - Free Report) and KB Home (KBH - Free Report) are some stocks boasting high earnings yield.
Just like the case with dividend yield, firms with higher earnings yield are considered underpriced, while those with lower earnings yield are seen as overpriced. Earnings yield captures both the tangible and intangible yield of a firm, as opposed to dividend yield, which only takes into account the tangible yield.
Importantly, 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.
Earnings Yield: Simply the Inverse of P/E
Earnings yield is nothing but the reciprocal of one of the most popular valuation metrics, i.e., the P/E ratio (stock price/earnings per share). In fact, as the concept of earnings yield is already indirectly captured in the P/E ratio, earnings yield as an investment valuation metric is not as widely used as the P/E ratio.
Having said that, it should be noted that earnings yield is an important tool for investors with exposure to both stocks and bonds. In fact, with regard to this, earnings yield can be more illuminating than the traditional P/E ratio, as the former facilitates the comparison of stocks with fixed-income securities.
The Winning Strategy
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.
Here we discuss five of the 113 stocks that qualified the screen:
Crocs: This booming footwear brand currently flaunts a Zacks Rank #1. Crocs has been gaining from sturdy consumer demand for its brands. The company’s focus on product innovation and marketing, digital capabilities, and tapping growth opportunities in Asia bode well. The impending buyout of privately-owned competitor HEYDUDE is set to boost prospects further. CROX expects to generate revenues of more than $5 billion by 2026, representing a CAGR of more than 17% in the next five years.
The Zacks Consensus Estimate for Crocs’ 2022 earnings and sales implies year-over-year growth of 23.2% and 49%, respectively. The 2022 bottom-line estimate has been revised upward by 21 cents a share over the past 30 days.
Pfizer: This pharma giant currently sports a Zacks Rank #1. Pfizer expects strong growth of key brands like Ibrance, Inlyta and Eliquis to drive sales. PFE’s COVID-19 vaccine has become a key contributor to its top line. The approval of Paxlovid, Pfizer’s oral antiviral pill for COVID-19, will bring in additional revenues in 2022. PFE boasts a sustainable pipeline with multiple late-stage programs that can drive growth.
The Zacks Consensus Estimate for Pfizer’s 2022 earnings and sales implies year-over-year growth of 53% and 33%, respectively. The 2022 bottom-line estimate has been revised upward by 71 cents a share over the past 30 days.
ExxonMobil: This integrated energy behemoth currently flaunts a Zacks Rank #1. ExxonMobil’s bellwether status and an optimal integrated capital structure, which have historically led to industry-leading returns, make it a relatively lower-risk energy sector play. The company aims to reduce greenhouse gas emissions by 30% in the upstream business. At the same time, XOM expects to reduce flaring and methane emissions by 40%. The firm’s efforts toward a lower carbon future are praiseworthy.
The Zacks Consensus Estimate for ExxonMobil’s 2022 earnings and sales implies year-over-year growth of 29.9% and 8%, respectively. The 2022 bottom-line estimate has been revised upward by 31 cents a share over the past seven days.
KB Home: One of the largest homebuilders in the United States, KB Home sports a Zacks Rank #1. A robust backlog level, a strong lineup of community openings and a solid return-focused growth model will help KB Home generate as much as $7.6 billion in housing revenues and double-digit operating margin in fiscal 2022. KBH’s returns-focused growth plan, Built-to-Order approach and accretive land acquisition strategies are expected to drive the company’s growth.
The Zacks Consensus Estimate for KB Home’s fiscal 2022 earnings and sales implies year-over-year growth of 68% and 30%, respectively. The fiscal 2022 bottom-line estimate has been revised upward by $2.28 a share over the past 30 days.
Sonic: It is one of the leading automotive retailers in the United States that currently carries a Zacks Rank #2. Sonic’s EchoPark unit is the major growth engine of the firm. Sonic targets 575,000 units sales and $14 billion in annual EchoPark revenues by 2025, with a nationwide distribution network of more than 140 stores. The buyout of RFJ Auto Partners is expected to add $3.2 billion to Sonic’s annual revenues and catapult the firm into the top-five biggest dealership groups in the United States.
The Zacks Consensus Estimate for Sonic’s 2022 earnings and sales implies year-over-year growth of 19.4% and 37%, respectively. The 2022 bottom-line estimate has been revised upward by 26 cents a share over the past 30 days.
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: Bigstock
Boost Your Returns With These 5 High Earnings Yield Stocks
Investors often use the P/E ratio and other valuation metrics to pick undervalued stocks with solid upside potential. One can also use another interesting ratio. Earnings yield, expressed in percentage, is calculated as (Annual Earnings per Share/Market Price) x 100. While comparing stocks, if other factors are similar, investors can look out for stocks with higher earnings yield. This is because stocks with higher earnings yield have the potential of providing comparatively greater returns. Crocs (CROX - Free Report) , Sonic Automotive (SAH - Free Report) , Pfizer (PFE - Free Report) , ExxonMobil Corporation (XOM - Free Report) and KB Home (KBH - Free Report) are some stocks boasting high earnings yield.
Just like the case with dividend yield, firms with higher earnings yield are considered underpriced, while those with lower earnings yield are seen as overpriced. Earnings yield captures both the tangible and intangible yield of a firm, as opposed to dividend yield, which only takes into account the tangible yield.
Importantly, 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.
Earnings Yield: Simply the Inverse of P/E
Earnings yield is nothing but the reciprocal of one of the most popular valuation metrics, i.e., the P/E ratio (stock price/earnings per share). In fact, as the concept of earnings yield is already indirectly captured in the P/E ratio, earnings yield as an investment valuation metric is not as widely used as the P/E ratio.
Having said that, it should be noted that earnings yield is an important tool for investors with exposure to both stocks and bonds. In fact, with regard to this, earnings yield can be more illuminating than the traditional P/E ratio, as the former facilitates the comparison of stocks with fixed-income securities.
The Winning Strategy
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 Picks
Here we discuss five of the 113 stocks that qualified the screen:
Crocs: This booming footwear brand currently flaunts a Zacks Rank #1. Crocs has been gaining from sturdy consumer demand for its brands. The company’s focus on product innovation and marketing, digital capabilities, and tapping growth opportunities in Asia bode well. The impending buyout of privately-owned competitor HEYDUDE is set to boost prospects further. CROX expects to generate revenues of more than $5 billion by 2026, representing a CAGR of more than 17% in the next five years.
The Zacks Consensus Estimate for Crocs’ 2022 earnings and sales implies year-over-year growth of 23.2% and 49%, respectively. The 2022 bottom-line estimate has been revised upward by 21 cents a share over the past 30 days.
Pfizer: This pharma giant currently sports a Zacks Rank #1. Pfizer expects strong growth of key brands like Ibrance, Inlyta and Eliquis to drive sales. PFE’s COVID-19 vaccine has become a key contributor to its top line. The approval of Paxlovid, Pfizer’s oral antiviral pill for COVID-19, will bring in additional revenues in 2022. PFE boasts a sustainable pipeline with multiple late-stage programs that can drive growth.
The Zacks Consensus Estimate for Pfizer’s 2022 earnings and sales implies year-over-year growth of 53% and 33%, respectively. The 2022 bottom-line estimate has been revised upward by 71 cents a share over the past 30 days.
ExxonMobil: This integrated energy behemoth currently flaunts a Zacks Rank #1. ExxonMobil’s bellwether status and an optimal integrated capital structure, which have historically led to industry-leading returns, make it a relatively lower-risk energy sector play. The company aims to reduce greenhouse gas emissions by 30% in the upstream business. At the same time, XOM expects to reduce flaring and methane emissions by 40%. The firm’s efforts toward a lower carbon future are praiseworthy.
The Zacks Consensus Estimate for ExxonMobil’s 2022 earnings and sales implies year-over-year growth of 29.9% and 8%, respectively. The 2022 bottom-line estimate has been revised upward by 31 cents a share over the past seven days.
KB Home: One of the largest homebuilders in the United States, KB Home sports a Zacks Rank #1. A robust backlog level, a strong lineup of community openings and a solid return-focused growth model will help KB Home generate as much as $7.6 billion in housing revenues and double-digit operating margin in fiscal 2022. KBH’s returns-focused growth plan, Built-to-Order approach and accretive land acquisition strategies are expected to drive the company’s growth.
The Zacks Consensus Estimate for KB Home’s fiscal 2022 earnings and sales implies year-over-year growth of 68% and 30%, respectively. The fiscal 2022 bottom-line estimate has been revised upward by $2.28 a share over the past 30 days.
Sonic: It is one of the leading automotive retailers in the United States that currently carries a Zacks Rank #2. Sonic’s EchoPark unit is the major growth engine of the firm. Sonic targets 575,000 units sales and $14 billion in annual EchoPark revenues by 2025, with a nationwide distribution network of more than 140 stores. The buyout of RFJ Auto Partners is expected to add $3.2 billion to Sonic’s annual revenues and catapult the firm into the top-five biggest dealership groups in the United States.
The Zacks Consensus Estimate for Sonic’s 2022 earnings and sales implies year-over-year growth of 19.4% and 37%, respectively. The 2022 bottom-line estimate has been revised upward by 26 cents a share over the past 30 days.
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.