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A Trio of Highly Profitable Business With Solid Conditions

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- By Alberto Abaterusso

In search of value opportunities, investors could be interested in the three stocks listed below, as they represent equities in companies with high profitability and robust financial conditions. These qualities are represented by GuruFocus profitability and financial strength ratings of at least 6 out of 10.

Additionally, Wall Street sell-side analysts have issued positive ratings for them, indicating that share prices are foreseen to perform well over the next few months.


Louisiana-Pacific Corp

The first stock that qualifies is Louisiana-Pacific Corp (NYSE:LPX), a Nashville, Tennessee-based manufacturer of building materials and equipment that are mainly used to construct, repair and restyle residential buildings and to realize outdoor architectures.

GuruFocus rated its financial strength 7 out of 10, driven by a debt-Ebitda ratio of 0.52, which ranks better than 85.71% of 1,190 companies operating in the construction industry, an Altman Z-Score of 8.57 and a Piotroski F-Score of 8.

Furthermore, Louisiana-Pacific Corp has a return on invested capital (ROIC) of 38.45%, which is substantially above the weighted average cost of capital (WACC) of 12.14%.

GuruFocus rated its profitability 6 out of 10, driven by a return on equity (ROE) ratio of 46.63% and a return on capital (ROC) ratio of 55.62%, ranking better than 98.28% and 88.62% of competitors, respectively.

The share price ($67.49 as of April 19) has gained 319.31% over the past year for a market capitalization of $7.22 billion, a price-earnings ratio of 15.09 (versus the industry median of 16.02) and a price-book ratio of 5.84 (versus the industry median of 1.16).

A Trio of Highly Profitable Business With Solid Conditions
A Trio of Highly Profitable Business With Solid Conditions

The price-sales ratio is 2.74 (versus the industry median of 0.76) and the 52-week range is $14.44 to $69.02.

On Wall Street, as of April, the stock has a median recommendation rating of overweight and an average target price of $61.63 per share.

Exponent Inc

The second stock that makes the cut is Exponent Inc (NASDAQ:EXPO), a Menlo Park, California-based science and engineering consulting company.

GuruFocus rated its financial strength 7 out of 10, driven by a debt-Ebitda ratio of 0.23, which ranks better than 89.12% of 726 companies operating in the business services industry, and an Altman Z-Score of 17.12.

The ROIC of 28.83% is more than twice the WACC of 4.11%, suggesting that the investment is returning a higher yield than the cost to raise the needed capital.

GuruFocus rated the company's profitability 9 out of 10, driven by a return on equity (ROE) ratio of 24.12% and a return on capital (ROC) ratio of 93.28%, ranking better than 90.87% and 86.93% of peers, respectively.

The share price ($98.96 as of April 19) has gained 42.70% over the past year for a market capitalization of $5.12 billion, a price-earnings ratio of 63.82 (versus the industry median of 23.03) and a price-book ratio of 14.18 (versus the industry median of 2.27).

A Trio of Highly Profitable Business With Solid Conditions
A Trio of Highly Profitable Business With Solid Conditions

The price-sales ratio is 13.2 (versus the industry median of 1.24) and the 52-week range is $61.47 to $102.42.

On Wall Street, as of April, the stock has a median recommendation rating of overweight and an average target price of $109.67 per share.

Cirrus Logic Inc

The third stock that meets the above characteristics is Cirrus Logic Inc (NASDAQ:CRUS), an Austin, Texas-based manufacturer of analog and mixed-signal integrated circuits, which are offered in the United States and internationally.

GuruFocus rated its financial strength 8 out of 10, driven by an interest coverage ratio of 231.54 (versus the industry median of 23.45), an Altman Z-Score of 8.51 and a Piotroski F-Score of 7.

The ROIC is 17.81% versus a WACC of 7.44%, which indicates the company's investments are yielding back more than what it costs to raise the necessary funds.

GuruFocus rated the company's profitability 8 out of 10, driven by a return on assets (ROA) ratio of 12.02% and a return on capital (ROC) ratio of 43.96%, ranking better than 84.75% and 81.78% of peer companies, respectively.

The share price ($84.56 as of April 19) has risen by 27% over the past year for a market capitalization of $4.85 billion, a price-earnings ratio of 24.81 (versus the industry median of 34.16) and a price-book ratio of 3.47 (versus the industry median of 3.12).

A Trio of Highly Profitable Business With Solid Conditions
A Trio of Highly Profitable Business With Solid Conditions

The price-sales ratio is 3.72 (versus the industry median of 3.1) and the 52-week range is $55.3 to $103.25.

On Wall Street, as of April, the stock has a median recommendation rating of overweight with an average target price of $103.56 per share.

Disclosure: I have no positions in any securities mentioned.

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This article first appeared on GuruFocus.