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Zacks.com featured highlights include: Medifast, 1800 FLOWERS.COM, USANA Health Sciences, UFP Industries and AllianceBernstein

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Zacks Equity Research
·5 min read
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For Immediate Release

Chicago, IL – March 23, 2021 – Stocks in this week’s article are Medifast, Inc. MED, 1800 FLOWERS.COM, Inc. FLWS, USANA Health Sciences, Inc. USNA, UFP Industries, Inc. UFPI and AllianceBernstein Holding L.P. AB.

5 Best Stocks to Buy After Analyzing ROE the DuPont Way

Return on equity (ROE) is one of the most coveted metrics among investors in search of profit-generating stocks. Delving into the basic ROE, with the help of DuPont analysis, before shortlisting stocks could lead to even better returns. It's basically taking ROE apart to examine how it works. Here is how DuPont breaks down ROE into its different components:

ROE = Net Income/Equity

Net Income / Equity = (Net Income / Sales) * (Sales / Assets) * (Assets / Equity)

ROE = Profit Margin * Asset Turnover Ratio * Equity Multiplier

Inside DuPont's Effectiveness

Although one can't stress the importance of ROE enough, the fact remains that it doesn't always provide a complete picture. But the DuPont analysis allows investors to assess which of the elements is dominant in any change in ROE. It can help investors to segregate companies having high margins from those having high turnover. For example, high end fashion brands generally survive on high margin as compared with retail goods which rely on higher turnover.

In fact, it also sheds light on a company's leverage status, which can go a long way in selecting stocks poised for gains. A lofty ROE could be due to the overuse of debt. Thus, ROE of a company can be misleading if it has a high debt burden.

So, an investor looking at two stocks only from an ROE perspective will be impartial if the values are the same. However, DuPont analysis will help to differentiate between the two stocks and find the better one. Thus, a company with a healthy mix of all the three ratios – profit margin, asset turnover ratio and equity multiplier – will be the most alluring.

DuPont analysis is not very difficult, as the required numbers are available in the company income statement and balance sheet of a company.

For the rest of this Screen of the Week article please visit Zacks.com at: https://www.zacks.com/stock/news/1283433/5-best-stocks-to-buy-after-analyzing-roe-the-dupont-way

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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Strong Stocks that Should Be in the News

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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/performance for information about the performance numbers displayed in this press release.


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AllianceBernstein Holding L.P. (AB) : Free Stock Analysis Report
 
UFP Industries, Inc. (UFPI) : Free Stock Analysis Report
 
1800 FLOWERS.COM, Inc. (FLWS) : Free Stock Analysis Report
 
USANA Health Sciences, Inc. (USNA) : Free Stock Analysis Report
 
MEDIFAST INC (MED) : Free Stock Analysis Report
 
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