For Immediate Release
Chicago, IL – August 12, 2022 – Stocks in this week’s article are Marriott International, Inc. MAR, Mastercard Inc. MA, Builders FirstSource, Inc. BLDR, Rockwell Automation, Inc. ROK and ON Semiconductor Corp. ON.
5 Stocks with High ROE to Buy on Inflation Downtrend
The equity markets witnessed a sharp rally in the past couple of trading sessions as the July report on the consumer price index revealed a better-than-expected slowdown in rising commodity prices. While core inflation (excluding volatile food and energy prices) increased 5.9% annually, inflation climbed 8.5% in July compared with broader expectations of 6.1% and 8.7% rise, respectively.
This seemed to soothe frayed investor nerves as it appeared that inflation was slowly running out of steam and largely buoyed the equity markets. This, in turn, will further force the Fed to take stock of its aggressive rate hike policy and the overall economic health ahead of its September policy meeting.
Investors also await clarity regarding the future interest rate path and its likely impact on the stock market with a probable easing of the monetary tightening if inflation data continues to cool off. The central bank had earlier offered a broad outline of its reduction in asset holdings for monetary tightening. The Fed intends to reduce Treasury holdings and mortgage-backed securities by $30 billion and $17.5 billion, respectively, from June and extend the tallies to $65 billion and $35 billion after three months.
As investors employ a wait-and-see approach in a classic example of "backing and filling" in the market, they can benefit from 'cash cow' stocks that garner higher returns. However, identifying cash-rich stocks alone does not make for a solid investment proposition unless it is backed by attractive efficiency ratios like return on equity (ROE). A
high ROE ensures that the company is reinvesting cash at a high rate of return. Marriott International, Inc., Mastercard Inc., Builders FirstSource, Inc., Rockwell Automation, Inc. and ON Semiconductor Corp. are some of the stocks with high ROE to profit.
ROE: A Key Metric
ROE = Net Income/Shareholders' Equity
ROE helps investors distinguish profit-generating companies from profit burners and is useful in determining the financial health of a company. In other words, this financial metric enables investors to identify companies 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 multiplying its profits without investing new equity capital and portrays management's efficiency in rewarding shareholders with attractive risk-adjusted returns.
Here are five of the 21 stocks that qualified the screen:
Marriott International, Inc.: Headquartered in Bethesda, MD, Marriott is a leading worldwide hospitality company focused on lodging management and franchising. It boasts a portfolio of more than 8,000 properties under 30 leading brands spanning 139 countries and territories.
Marriott delivered a trailing four-quarter earnings surprise of 36.2%, on average and has a long-term earnings growth expectation of 41.7%. It has a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank stocks here.
Mastercard Inc.: Headquartered in Purchase, NY, Mastercard is a leading global payment solutions company that provides an array of services in support of credit, debit, mobile, web-based and contactless payments and other related electronic payment programs to financial institutions and other entities.
The company has a long-term earnings growth expectation of 19.8% and delivered a trailing four-quarter earnings surprise of 12.9%, on average. Mastercard carries a Zacks Rank #2.
Builders FirstSource, Inc.: Based in Dallas, TX, Builders FirstSource is the largest supplier of building materials, manufactured components and construction services to professional homebuilders, sub-contractors, remodelers and consumers. The company operates in more than 565 locations in 42 states all over the United States.
Builders FirstSource carries a Zacks Rank #2. The company delivered a trailing four-quarter earnings surprise of 88.6%, on average.
Rockwell Automation, Inc.: Based in Milwaukee, WI, Rockwell Automation provides industrial automation and information solutions worldwide. The company has a wide network spanning more than 100 countries. The company operates manufacturing facilities in the United States and multiple other countries.
This Zacks #2 Ranked company delivered a trailing four-quarter earnings surprise of 0.5%, on average. Rockwell Automation has a long-term earnings growth expectation of 9.7%.
ON Semiconductor Corp.: Headquartered in Phoenix, AZ, ON Semiconductor is an original equipment manufacturer of a broad range of discrete and embedded semiconductor components. Its product line includes discretes, such as bipolar transistors, diodes, filters, FETs, rectifiers and thyristors.
The company has a long-term earnings growth expectation of 25.6% and delivered a trailing four-quarter earnings surprise of 14%, on average. ON Semiconductor carries a Zacks Rank #2.
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/1967107/5-stocks-with-high-roe-to-buy-on-downtrend-in-inflation-data
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
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.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Mastercard Incorporated (MA) : Free Stock Analysis Report
Marriott International, Inc. (MAR) : Free Stock Analysis Report
Rockwell Automation, Inc. (ROK) : Free Stock Analysis Report
Builders FirstSource, Inc. (BLDR) : Free Stock Analysis Report
ON Semiconductor Corporation (ON) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research