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A Trio of Stocks Whose Return on Equity Ratios Beat Their Industries

GuruFocus.com
·5 min read

- By Alberto Abaterusso

When a company's return on equity (ROE) ratio outperforms its industry median, it usually implies the company has been better than many of its competitors in terms of generating profits.

Thus, investors may be interested in the following stocks, as they are outperforming most of their competitors in terms of a better ROE ratio.


Amazon.com Inc

The first stock to consider is Amazon.com Inc (NASDAQ:AMZN), a Seattle, Washington-based online retail giant.

Amazon.com Inc has a ROE ratio of 21.22%, outperforming the industry median of 2.94% tremendously, as it ranks higher than 877 out of 977 companies operating in its industry.

The share price has risen 73% over the past year up to $3,149.84 at close on Tuesday for a market capitalization of $1.58 trillion and a 52-week range of $1,626.03 to $3,552.25.

A Trio of Stocks Whose Return on Equity Ratios Beat Their Industries
A Trio of Stocks Whose Return on Equity Ratios Beat Their Industries

The stock has a price-sales ratio of 4.96 (compared to the industry median of 0.62), a price-book ratio of 21.4 (versus the industry median of 1.45) and a price-earnings ratio of 121.1 (versus the industry median of 21.13).

As of September, Wall Street recommends 15 strong buys, 28 buys, three holds and one underperform rating for the stock. It has established an average target price of $ 3,661.68 per share. The net earnings per share (EPS) is predicted to increase by 37.3% this year, 39% next year and by 36% per annum over the next five years.

GuruFocus has assigned a financial strength rating of 6 out of 10 and a profitability rating of 8 out of 10 to the company.

Amazon.com Inc does not pay dividends.

Campbell Soup Co

The second stock investors may want to consider is Campbell Soup Co (NYSE:CPB), a Camden, New Jersey-based manufacturer and marketer of food and beverage products in North America.

Campbell Soup Co has a ROE ratio of 81.56%, which is outperforming the industry median of 5.53%, as it ranks higher than 1,553 out of 1,576 competitors.

The share price has decreased by 1.5% in the past year down to $45.22 at close on Tuesday for a market capitalization of $13.66 billion and a 52-week range of $40.70 to $57.54.

A Trio of Stocks Whose Return on Equity Ratios Beat Their Industries
A Trio of Stocks Whose Return on Equity Ratios Beat Their Industries

The stock has a price-sales ratio of 1.58 (compared to the industry median of 0.97), a price-book ratio of 5.35 (versus the industry median of 1.44) and a price-earnings ratio of 8.45 (versus the industry median of 19.54).

As of September, Wall Street sell-side analysts recommend two buy ratings, 10 hold ratings, four underperform ratings and one sell rating for the stock and have established an average target price of $52.94 per share. The EPS is forecasted to go down nearly 5% this year before rising again by 1.7% next year and 8.64% per annum over the next five years.

GuruFocus has assigned a financial strength rating of 4 out of 10 and a profitability rating of 7 out of 10 to the company.

Campbell Soup Co is currently paying a 35 cents quarterly cash dividend, which, based on Tuesday's closing price, produces 3.1% trailing 12-month and forward dividend yields. The S&P 500 offers 1.79% as of Sept. 8.

Texas Instruments Inc

The third stock under consideration is Texas Instruments Inc (NASDAQ:TXN), a Dallas, Texas-based manufacturer of semiconductors supplied to electronics designers and manufacturers worldwide.

Texas Instruments Inc has a ROE ratio of 60.49%, which is thrashing the industry median of 5.69%, ranking higher than 788 out of 795 competitors operating in the semiconductors industry.

The share price has increased by 8% over the past year up to $136.04 at close on Tuesday for a market capitalization of $124.6 billion and a 52-week range of $93.09 to $148.37.

A Trio of Stocks Whose Return on Equity Ratios Beat Their Industries
A Trio of Stocks Whose Return on Equity Ratios Beat Their Industries

The price-sales ratio is 9.37 (versus the industry median of 2.07), the price-book ratio is 16.29 (versus the industry median of 2.1) and the price-earnings ratio is 25.52 (versus the industry median of 25.49).

As of September, Wall Street recommends six strong buys, eight buys, 17 holds and one underperform rating for the stock and has set an average target price of $139.71 per share. The EPS is forecasted to decrease by about 1.3% this year before going up again by 5.6% next year and by 10% per annum over the next five years.

GuruFocus has assigned a score of 7 out of 10 to the financial strength rating and a score of 9 out of 10 to the profitability rating of the company.

Texas Instruments Inc is currently paying a 90 cents quarterly cash dividend, which, based on Tuesday's closing price, generates 2.65% trailing 12-month and forward dividend yields. The S&P 500 offers 1.79% as of Sept. 8.

Disclosure: I have no positions in any security mentioned in this article.

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This article first appeared on GuruFocus.