For Immediate Release
Chicago, IL – March 22, 2017 – Stocks in this week’s article include Conagra Brands, Inc. (NYSE: CAG – Free Report ), Broadcom Limited (NASDAQ: AVGO – Free Report ), Deere & Company (NYSE: DE – Free Report ), Electronic Arts Inc. (NASDAQ: EA – Free Report ) and CBRE Group, Inc. (NYSE: CBG – Free Report ).
Screen of the Week of Zacks Investment Research:
5 Top ROE Stocks to Make the Most of a Placid Market
The U.S. equity market clambered up last week as the Fed raised interest rates for the second time in three months. However, the exuberance fizzled out as a token rate hike was already factored into the decision making.
As investors employ a wait-and-see approach in a classic example of “backing and filling” in the market, they could benefit from ‘cash cow’ stocks that rake in higher returns.
However, singling out cash-rich stocks alone does not make for a solid investment proposition unless they are backed by attractive efficiency ratios like return on equity (ROE). A high ROE ensures that the company is reinvesting its cash at a high rate of return.
ROE: A Key Metric
ROE = Net Income/Shareholders’ Equity
ROE helps investors distinguish between profit-generating companies from profit burners and is useful for determining the financial health of a company. In other words, this financial metric enables investors to identify stocks that diligently deploy cash for higher returns.
Moreover, ROE is often used to compare the profitability of a company with other firms in the industry – the higher, the better. It measures how well a company is increasing its profits without investing new equity capital in the business and portrays management efficiency in rewarding shareholders with attractive risk-adjusted returns.
Screening Parameters
In order to shortlist stocks that are cash rich with high ROE, we have added Cash Flow greater than $ 1 billion and ROE greater than X-Industry as our primary screening parameters. In addition, we have taken a few other criteria into consideration to arrive at a winning strategy.
Price/Cash Flow less than X-Industry: This metric measures how much investors pay for one dollar of free cash flow. A lower ratio indicates that investors need to pay less for a better cash flow generating stock.
Return on Assets (ROA) greater than X-Industry: This metric determines how much profit a company earns for every dollar of asset, which includes cash, accounts receivable, property, equipment, inventory and furniture. The higher the ROA, the better it is for the company.
5-Year EPS Historical Growth greater than X-Industry: This criterion indicates that continued earnings momentum has translated into solid cash strength.
Zacks Rank less than or equal to 2: Zacks Rank #1 (Strong Buy) or 2 (Buy) stocks are known to outperform irrespective of the market environment.
Here are five of the 20 stocks that qualified the screen:
Conagra Brands, Inc. (NYSE: CAG – Free Report ): Chicago-based Conagra is one of the leading branded food firms of North America. The company offers premium edible products, with refined focus on innovation. This Zacks Rank #2 stock has a trailing four-quarter average earnings surprise of 13.3% and long-term earnings growth expectation of 8%.
Broadcom Limited (NASDAQ: AVGO – Free Report ): Broadcom is a premier designer, developer and global supplier of a broad range of semiconductor devices with a focus on complex digital and mixed signal complementary metal oxide semiconductor based devices and analog III-V based products. The company has a trailing four-quarter average earnings surprise of 5.9% and long-term earnings growth expectation of 13.6%. Broadcom carries a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here .
Deere & Company (NYSE: DE – Free Report ): Founded in 1837, IL-based Deere is engaged in the production and distribution of agricultural and forestry equipment, construction equipment and engines worldwide. This Zacks Rank #2 stock has modest long-term earnings growth expectation of 7.6% with a stellar trailing four-quarter average earnings surprise of 60.5%.
Electronic Arts Inc. (NASDAQ: EA – Free Report ): Headquartered in Redwood City, CA, Electronic Arts develops games, content and services for consoles, personal computers, mobile phones, and tablets worldwide. This Zacks Rank #2 stock has a solid trailing four-quarter average earnings surprise of 32.9% and long-term earnings growth projection of 16.1%.
CBRE Group, Inc. (NYSE: CBG – Free Report ): Headquartered in Los Angeles, CBRE is a commercial real estate services and investment firm, offering a wide range of services to tenants, owners, lenders and investors in office, retail, industrial, multi-family and other types of commercial real estates across all major metropolitan areas worldwide. This Zacks Rank #1 stock has a trailing four-quarter average earnings surprise of 8.2% and long-term earnings growth projection of 12.5%.
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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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ConAgra Foods Inc. (CAG): Free Stock Analysis Report
Broadcom Limited (AVGO): Free Stock Analysis Report
Deere & Company (DE): Free Stock Analysis Report
Electronic Arts Inc. (EA): Free Stock Analysis Report
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