For Immediate Release
Chicago, IL – July 19, 2022 – Stocks in this week’s article are Sanderson Farms Inc. , MEDIFAST (
MED Quick Quote MED - Free Report) , Skyline ( SKY Quick Quote SKY - Free Report) , Hudson Global ( HSON Quick Quote HSON - Free Report) and Expeditors International of Washington ( EXPD Quick Quote EXPD - Free Report) . Dive into DuPont Analysis with These Top-5 Stocks
Return on equity (ROE) is one of the most favored metrics of investors. It is a profitability ratio that measures earnings generated by a company from its equity. Investors can follow the ROE trend in companies and compare this to historical or industry benchmarks to pick a winning stock.
However, stepping beyond the basic ROE and analyzing it at an advanced level could lead to even better returns. Here is where the DuPont analysis comes into play. It is an analytical method, which examines three major elements — operating management, management of assets and the capital structure — related to the financial condition of a company. Below we show how DuPont breaks down ROE into its different components:
ROE = Net Income/Equity
Net Income / Equity = (Net Income / Sales) * (Sales / Assets) * (Assets / Equity)
ROE = Profit Margin * Asset Turnover Ratio * Equity Multiplier
Why Use DuPont?
Although one can't play down the importance of normal ROE calculation, the fact remains that it doesn't always provide a complete picture. The DuPont analysis, on the other hand, allows investors to assess the elements that play a dominant role in any change in ROE.
It can help investors to segregate companies having higher margins from those having high turnover. For example, high-end fashion brands generally survive on high margin as compared with retail goods, which rely on higher turnover.
In fact, it also sheds light on the company's leverage status, which can go a long way in selecting stocks poised for gains. A lofty ROE could be due to the overuse of debt. Thus, the strength of a company can be misleading if it has a high debt load.
So, an investor confined solely to an ROE perspective may be confused if he or she has to judge between two stocks of equal ratio. This is where DuPont analysis wins over and spots the better stock.
Investors can simply do this analysis by taking a look at the company's financials.However, looking at financial statements of each company separately can be a tedious task. Screening tools like Zacks Research Wizard can come to your rescue and help you shortlist the stocks that look impressive with a DuPont analysis.
Here are five of nine stocks that made it through the screen:
Sanderson Farms Inc .: This Zacks Rank #1 company produces, processes, markets and distributes fresh and frozen chicken products. You can see . the complete list of today's Zacks #1 Rank stocks here
The average earnings surprise of SAFM for the past four quarters is 60.49%.
MEDIFAST: The Zacks Rank #2company is a leading manufacturer and distributor of clinically-proven healthy living products and programs.
The average earnings surprise of MED for the past four quarters is 12.94%.
Skyline: The Zacks Rank #1 company designs, produces and distributes manufactured housing and recreational vehicles.
The average earnings surprise of SKY for the past four quarters is 45.32%.
Hudson Global: The Zacks Rank #2 company provides recruitment and related talent solutions worldwide.
The average earnings surprise of HSON for the past four quarters is 129.60%.
Expeditors International of Washington: The Zacks Rank #2 company is a leading third-party logistics provider.
The average earnings surprise of EXPD for the past four quarters is 21.38%.
You can get the rest of the stocks on this list by signing up now for your 2-week free trial to the Research Wizard and start using this screen in your own trading. Further, you can also create your own strategies and test them first before taking the investment plunge.
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/1953439/dive-into-dupont-analysis-pick-5-top-stocks 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.
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Contact: Jim Giaquinto
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