Back to top

Image: Shutterstock

Zacks.com featured highlights include Eagle Pharmaceuticals, Cabot, Meritage Homes, Griffon, and APA

Read MoreHide Full Article

For Immediate Release

Chicago, IL – June 2, 2022 – Stocks in this week’s article are Eagle Pharmaceuticals (EGRX - Free Report) , Cabot Corp (CBT - Free Report) , Meritage Homes (MTH - Free Report) , Griffon Corp. (GFF - Free Report) and APA Corp. (APA - Free Report)

Press the Buy Button on These 5 High Earnings Picks

Wall Street wrapped up the last week of the turbulent month of May on a good note. Last week, all three major U.S. indexes — S&P 500, Dow Jones and Nasdaq — rose 6% or higher for the first time since November 2020. The market seemed reassured that the central bank won't ramp up its tightening efforts beyond current expectations. Wall Street already partially priced in the Fed's plan to raise its core interest rate by 0.50% at each of the next two meetings. The latest Fed minutes signal that it plans to stay that course, at least for now.

While the first-quarter 2022 U.S. GDP fell 1.5%, worse than the expected decline of 1.3%, the Fed officials are hopeful of a rebound in the second quarter and anticipate GDP growth over the remainder of the year. That's sort of deflating the recession narrative. Having said that, the risks of extended economic weakness loom large and the  reasons for that are many. The complete devastation of the global supply-chain system, rising interest rates, high inflation and escalating commodity prices, thanks to a prolonged war between Russia and Ukraine, remain causes of concern.

There are little chances that last week's rebound would sustain. As it is, markets closed in the red yesterday to start this holiday-shortened week, with S&P 500, Dow Jones and Nasdaq down 0.63%, 0.67% and 0.41%, respectively.  

Despite all the negatives, made worse by the Russian invasion and China's zero-covid lockdowns, investors shouldn't shun equity investing. Instead, they should be focused on finding value and scooping up fundamentally sound stocks that are currently trading at a discount.

In the current backdrop, value investing is the key strategy to capitalize on the long-term potential of stocks. One of the most common valuation metrics to pick undervalued stocks with solid upside potential is the P/E ratio.

However, there's another interesting ratio that you can consider for ferreting out attractively valued stocks. And that is, earnings yield. One could invest in high earnings yield stocks like Eagle Pharmaceuticals, Cabot Corp, Meritage Homes, Griffon Corp. and APA Corp. to fetch handsome long-term rewards.

Understanding Earnings Yield

For intelligent investors who intend to invest money either in bonds or stocks, information on certain key financial parameters is very important. One such key parameter is earnings yield.

Earnings Yield is measured as (Annual Earnings per Share/Market Price) x 100. While comparing similar stocks, the one with higher earnings yield is more likely to provide better returns, other factors remain constant.While comparing stocks, if other factors are similar, pick stocks with higher earnings yield as they are considered undervalued, while those with lower earnings yield are seen as overpriced.

While this ratio is vital for tracking undervalued stocks, it also comes in handy for comparing stocks with the market or fixed-income securities.For comparing the performance of a market index with the 10-year Treasury yield, this ratio is very useful. When the yield of the market index is higher than the 10-year Treasury yield, the stocks can be dubbed as undervalued in comparison to bonds. This indicates that investing in the stock market is a better choice for a value investor.

Investment in Treasury-bill is risk free. However, investing in stocks always comes with a caveat. Hence, it is a good idea to add a risk premium to Treasury yield while comparing it with the earnings yield of a stock or the broader market.

Our Choices

Eagle Pharmaceuticals: Eagle Pharmaceuticals is a specialty pharmaceutical company, which focuses on developing and commercializing injectable products primarily in the critical care and oncology areas in the United States. Based in New Jersey, EGRX currently sports a Zacks Rank #1.

The Zacks Consensus Estimate for Eagle Pharmaceuticals' 2022 earnings and sales implies a year-over-year jump of 1,345.5% and 132.5%, respectively.  The consensus mark for 2022 earnings has been upwardly revised by 29 cents over the past 30 days. In the trailing four quarters, Eagle Pharmaceuticals beat the Zacks Consensus Estimate thrice and missed once.

Cabot: Cabot is a leading global specialty chemicals and performance materials company, offering a broad range of products and solutions to customers in every corner of the planet and catering to major industries such as transportation, infrastructure, environment and consumer. Boston-based CBT currently sports a Zacks Rank #1.

The Zacks Consensus Estimate for Cabot's fiscal 2022 earnings and sales suggests year-over-year growth of 22% and 19%, respectively.  The consensus mark for fiscal 2022 earnings has been upwardly revised by 30 cents over the past 30 days. In the trailing four quarters, Cabot beat the Zacks Consensus Estimate on all occasions.

Meritage Homes: Meritage Homes is one of the leading homebuilders in the United States, primarily engaged in building and selling single-family homes for entry-level, first-time, move-up, luxury, and active adult buyers. Arizona-based Meritage Homes sports a Zacks Rank #1. 

The Zacks Consensus Estimate for Meritage Homes' 2022 earnings and sales implies year-over-year growth of 43% and 32%, respectively.  The consensus mark for 2022 earnings has been upwardly revised by 8 cents over the past 30 days. In the trailing four quarters, MTH beat the Zacks Consensus Estimate on all occasions.

Griffon: Griffon is a diversified management and holding company conducting business through wholly-owned subsidiaries. The company provides consumer and professional, and home and building products in the United States, Europe, Canada, Australia, and internationally. Headquartered in New York, GFF sports a Zacks Rank #1.

The Zacks Consensus Estimate for Griffon's fiscal 2022 earnings and sales implies year-over-year growth of 69% and 19.3%, respectively.  The consensus mark for fiscal 2022 earnings has been upwardly revised by 82 cents over the past 30 days. In the trailing four quarters, GFF beat the Zacks Consensus Estimate thrice and missed once.

APA: APA is one of the world's leading independent energy companies engaged in the exploration, development and production of natural gas, crude oil and natural gas liquids. Geographically, the company's operations are in the United States, Egypt and in the North Sea of the United Kingdom. APA also holds acreage offshore Suriname (South America) and other international locations. Texas-based APA currently carries a Zacks Rank #2.

The Zacks Consensus Estimate for APA's 2022 sales and earnings implies year-over-year growth of 40.3% and 174%, respectively. The consensus mark for EPS has moved north by 70 cents over the past 30 days. In the trailing four quarters, APA beat the Zacks Consensus Estimate twice for as many misses.  

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.

For the rest of this Screen of the Week article please visit Zacks.com at: https://www.zacks.com/stock/news/1932199/press-the-buy-button-on-these-5-high-earnings-yield-picks-now

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.

About Screen of the Week

Zacks.com created the first and best screening system on the web earning the distinction as the "#1 site for screening stocks" by Money Magazine.  But powerful screening tools is just the start. That is why Zacks created the Screen of the Week to highlight profitable stock picking strategies that investors can actively use.

Strong Stocks that Should Be in the News

Many are little publicized and fly under the Wall Street radar. They're virtually unknown to the general public. Yet today's 220 Zacks Rank #1 "Strong Buys" were generated by the stock-picking system that has more than doubled the market from 1988 through 2016. Its average gain has been a stellar +25% per year. See these high-potential stocks free >>.

Follow us on Twitter:  https://www.twitter.com/zacksresearch

Join us on Facebook:  https://www.facebook.com/ZacksInvestmentResearch

Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.

Contact: Jim Giaquinto

Company: Zacks.com

Phone: 312-265-9268

Email: pr@zacks.com

Visit: https://www.zacks.com/

Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.

Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.