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5 Best High Earnings Yield Picks to Grow Your Wealth
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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. Patterson-UTI Energy (PTEN - Free Report) , Jabil, Inc. (JBL - Free Report) , Catalyst Pharmaceuticals, Inc. (CPRX - Free Report) , AGCO Corporation (AGCO - Free Report) and Urban Outfitters Inc. (URBN - 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 an 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 we discuss five of the 76 stocks that qualified the screen:
Patterson-UTI: Patterson-UTI is one of the largest North American land drilling contractors, having a large, high-quality fleet of drilling rigs. The company’s technologically advanced “Apex” rigs are the key to its success. Patterson-UTI’s acquisition of Pioneer Energy Services has boosted its scale and geographic presence. PTEN currently sports a Zacks Rank #1 and has a Value Score of B.
The Zacks Consensus Estimate for PTEN’s 2023 earnings suggests year-over-year growth of 278%. The consensus mark for Patterson-UTI’s 2023 EPS has been revised upward by 10 cents in the past 30 days. The company surpassed estimates in three of the four trailing quarters and missed once, the average surprise being 169.2%.
Jabil: Jabil is one of the largest global suppliers of electronic manufacturing services. Product diversification and solid demand across end-markets are key drivers of growth. Jabil’s top-line growth is expected to benefit from strength in healthcare, cloud, retail and industrial domains. The rapid adoption of 5G wireless and cloud computing will benefit the firm in the long haul. JBL currently sports a Zacks Rank #1 and has a Value Score of A.
The Zacks Consensus Estimate for JBL’s fiscal 2023 earnings suggests year-over-year growth 9.4%. The consensus mark for Jabil’s current fiscal EPS has been revised upward by 19 cents in the past 60 days. The company surpassed estimates in the trailing four quarters, the average surprise being 8.8%.
Catalyst: Catalyst is a development-stage biopharmaceutical company, focused on the development and commercialization of therapies targeting rare neurological diseases and disorders. Catalyst’s lead drug Firdapse has been witnessing an encouraging uptake since its launch. The company’s efforts to expand its pipeline beyond Firdapse, either by way of acquisitions or by in-licensing rights of products or companies bode well. CPRX currently sports a Zacks Rank #1 and a VGM Score of B.
The Zacks Consensus Estimate for CPRX’s 2023 earnings suggests year-over-year growth of 84.3%. The consensus mark for Catalyst’s 2023 EPS has been revised upward by 36 cents in the past seven days. The company surpassed estimates in two of the four trailing quarters for as many misses.
AGCO: AGCO is a leading manufacturer and distributor of agricultural equipment and related replacement parts. AGCO’s results will benefit from improved farm equipment demand, owing to favorable farm economics. Moreover, pricing and cost reduction, and strategic investments will drive growth. The firm’s focus on innovation and automation also augurs well. AGCO currently carries a Zacks Rank #2 and has a Value Score of B.
The Zacks Consensus Estimate for AGCO’s 2023 earnings suggests year-over-year growth 13%. The consensus mark for AGCO’s 2023 EPS has been revised upward by 15 cents in the past 30 days. The company surpassed estimates in the trailing four quarters, the average surprise being 29.3 %.
Urban Outfitters: Urban Outfitters is a lifestyle specialty retailer that offers fashion apparel and accessories, footwear, home décor and gift products. The company is poised for growth on the back of technological advancements, merchandising improvements and store-rationalization efforts. The firm’s strategic growth initiative, FP Movement, bodes well. URBN currently carries a Zacks Rank #2 and has a Value Score of A.
The Zacks Consensus Estimate for URBN’s fiscal 2024 earnings suggests year-over-year growth of 31%. The consensus mark for Urban Outfitters’ fiscal 2024 EPS has been revised upward by 6 cents in the past 30 days. The long-term EPS growth rate of the company is 18%, higher than the industry’s 15.2%.
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 Best High Earnings Yield Picks to Grow Your Wealth
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. Patterson-UTI Energy (PTEN - Free Report) , Jabil, Inc. (JBL - Free Report) , Catalyst Pharmaceuticals, Inc. (CPRX - Free Report) , AGCO Corporation (AGCO - Free Report) and Urban Outfitters Inc. (URBN - 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 an 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 we discuss five of the 76 stocks that qualified the screen:
Patterson-UTI: Patterson-UTI is one of the largest North American land drilling contractors, having a large, high-quality fleet of drilling rigs. The company’s technologically advanced “Apex” rigs are the key to its success. Patterson-UTI’s acquisition of Pioneer Energy Services has boosted its scale and geographic presence. PTEN currently sports a Zacks Rank #1 and has a Value Score of B.
The Zacks Consensus Estimate for PTEN’s 2023 earnings suggests year-over-year growth of 278%. The consensus mark for Patterson-UTI’s 2023 EPS has been revised upward by 10 cents in the past 30 days. The company surpassed estimates in three of the four trailing quarters and missed once, the average surprise being 169.2%.
Jabil: Jabil is one of the largest global suppliers of electronic manufacturing services. Product diversification and solid demand across end-markets are key drivers of growth. Jabil’s top-line growth is expected to benefit from strength in healthcare, cloud, retail and industrial domains. The rapid adoption of 5G wireless and cloud computing will benefit the firm in the long haul. JBL currently sports a Zacks Rank #1 and has a Value Score of A.
The Zacks Consensus Estimate for JBL’s fiscal 2023 earnings suggests year-over-year growth 9.4%. The consensus mark for Jabil’s current fiscal EPS has been revised upward by 19 cents in the past 60 days. The company surpassed estimates in the trailing four quarters, the average surprise being 8.8%.
Catalyst: Catalyst is a development-stage biopharmaceutical company, focused on the development and commercialization of therapies targeting rare neurological diseases and disorders. Catalyst’s lead drug Firdapse has been witnessing an encouraging uptake since its launch. The company’s efforts to expand its pipeline beyond Firdapse, either by way of acquisitions or by in-licensing rights of products or companies bode well. CPRX currently sports a Zacks Rank #1 and a VGM Score of B.
The Zacks Consensus Estimate for CPRX’s 2023 earnings suggests year-over-year growth of 84.3%. The consensus mark for Catalyst’s 2023 EPS has been revised upward by 36 cents in the past seven days. The company surpassed estimates in two of the four trailing quarters for as many misses.
AGCO: AGCO is a leading manufacturer and distributor of agricultural equipment and related replacement parts. AGCO’s results will benefit from improved farm equipment demand, owing to favorable farm economics. Moreover, pricing and cost reduction, and strategic investments will drive growth. The firm’s focus on innovation and automation also augurs well. AGCO currently carries a Zacks Rank #2 and has a Value Score of B.
The Zacks Consensus Estimate for AGCO’s 2023 earnings suggests year-over-year growth 13%. The consensus mark for AGCO’s 2023 EPS has been revised upward by 15 cents in the past 30 days. The company surpassed estimates in the trailing four quarters, the average surprise being 29.3 %.
Urban Outfitters: Urban Outfitters is a lifestyle specialty retailer that offers fashion apparel and accessories, footwear, home décor and gift products. The company is poised for growth on the back of technological advancements, merchandising improvements and store-rationalization efforts. The firm’s strategic growth initiative, FP Movement, bodes well. URBN currently carries a Zacks Rank #2 and has a Value Score of A.
The Zacks Consensus Estimate for URBN’s fiscal 2024 earnings suggests year-over-year growth of 31%. The consensus mark for Urban Outfitters’ fiscal 2024 EPS has been revised upward by 6 cents in the past 30 days. The long-term EPS growth rate of the company is 18%, higher than the industry’s 15.2%.
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.