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Zacks.com featured highlights include: Calavo Growers, BMC Stock, Vipshop and AllianceBernstein

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For Immediate Release

Chicago, IL – January 30, 2020 – Stocks in this week’s article are Calavo Growers Inc. (CVGW - Free Report) , BMC Stock Holdings Inc. (BMCH - Free Report) , Vipshop Holdings Ltd. (VIPS - Free Report) and AllianceBernstein Holding L.P. (AB - Free Report) .

Deploy DuPont Strategy to Pick 4 Healthy Stocks

With global markets suffering due to the coronavirus attack, it is very important now to remain alert at the time of stock picking. While doing so, a look at the return-on-equity (ROE) ratio would be a good strategy.

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, delving a little deeper into the basic ROE and analyzing it at an advanced level could lead to even better returns. Here is where the DuPont analysis excels.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

Importance of Using DuPont

Although one cannot brush off the importance of normal ROE calculation, the fact remains that it doesn’t always portray 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 with higher margins from those having a high turnover. For example, high-end fashion brands generally survive on high margin as compared with retail goods, which rely on higher turnover.

And one of the ROE components – equity multiplier (explained below) – can help you judge how burdened a company is with debts. 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 a 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.

For the rest of this Screen of the Week article please visit Zacks.com at: https://www.zacks.com/stock/news/738455/deploy-dupont-strategy-to-pick-4-healthy-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.

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 >>.

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