Zacks.com featured highlights: Conagra Brands, General Motors, Texas Instruments, Electronic Arts and Celanese
For Immediate Release
Chicago, IL – March 06, 2017 - Stocks in this week’s article include Conagra Brands, Inc. (NYSE: CAG – Free Report ), General Motors Company (NYSE: GM – Free Report ), Texas Instruments Incorporated (NASDAQ: TXN – Free Report ), Electronic Arts Inc. (NASDAQ: EA – Free Report ) and Celanese Corporation (NYSE: CE – Free Report ).
Screen of the Week of Zacks Investment Research:
5 Top ROE Stocks to Buy as Markets Hit Record High
The U.S. equity market continued to scale higher in recent times with the Dow crossing the 21,000 mark and matching the fastest 1000-point march in history. The spurt was primarily led by President Donald Trump’s conciliatory tones while addressing a joint session of the Congress. The pro-growth agenda, centered on his ‘phenomenal’ tax cut plans, is likely to place the economy on a faster growth track, although the trade and healthcare proposals are expected to add to the uncertainty.
Amid such an equivocal scenario, investors are often on the lookout for ‘cash cow’ stocks that will enable them to 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.
Why ROE?
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.
Parameters Used for Screening
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 18 stocks that qualified the screen:
Conagra Brands, Inc. (NYSE: CAG – Free Report ): Chicago-based Conagra Brands 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%.
General Motors Company (NYSE: GM – Free Report ): Detroit, MI-based General Motors is a leading global automotive manufacturer. The company filed voluntary petitions for relief under Chapter 11 of the U.S. Bankruptcy Code on Jun 1, 2009. Pursuant to this, the New GM was formed by acquiring most of the assets and assuming certain liabilities of the Old GM as well as some of its direct and indirect subsidiaries. The company has a trailing four-quarter average earnings surprise of 19.7% and long-term earnings growth expectation of 9.4%. General Motors carries a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Texas Instruments Incorporated (NASDAQ: TXN – Free Report ): Headquartered in Dallas, TX, Texas Instruments, Inc. is an original equipment manufacturer of analog, mixed signal and digital signal processing integrated circuits. This Zacks Rank #1 stock has modest long-term earnings growth expectation of 9.6% with a trailing four-quarter average earnings surprise of 7.1%.
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%.
Celanese Corporation (NYSE: CE – Free Report ): Texas-based Celanese is a global hybrid chemical company that produces chemical substances and materials. This Zacks Rank #2 stock has a trailing four-quarter average earnings surprise of 6.8% and long-term earnings growth projection of 8.8%.
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ConAgra Foods Inc. (CAG): Free Stock Analysis Report
General Motors Company (GM): Free Stock Analysis Report
Texas Instruments Incorporated (TXN): Free Stock Analysis Report
Electronic Arts Inc. (EA): Free Stock Analysis Report
Celanese Corporation (CE): Free Stock Analysis Report
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