Zacks.com featured highlights Revolve Group, Olympic Steel, Boise Cascade, Watsco and Cross Country Healthcare
For Immediate Release
Chicago, IL – April 29, 2022 – Stocks in this week’s article are Revolve Group RVLV, Olympic Steel ZEUS, Boise Cascade BCC, Watsco WSO and Cross Country Healthcare CCRN.
5 DuPont-Tested Winning Stocks to Buy Now
Return on Equity (ROE) is one of the most-favored metrics of investors. It is a profitability ratio, which measures earnings generated by a company from its equity. Investors can follow the ROE trend in companies and compare this to historical or industry benchmarks to pick a winning stock.
However, stepping beyond the basic ROE and analyzing it at an advanced level could lead to even better returns. Here is where the DuPont analysis comes into play.It is an analytical method, which examines three major elements – operating management, management of assets and the capital structure – related to the financial condition of a company. Below we show 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
Importance of Du Pont
Although one can't play down the importance of normal ROE calculation, the fact remains that it doesn't always provide a complete picture. The DuPont analysis, on the other hand, allows investors to assess the elements that play a dominant role in any change in ROE. It can help investors to segregate companies having higher 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 the 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, the strength of a company can be misleading if it has a high debt load.
So, an investor confined solely to an ROE perspective may be confused if he or she has to judge between two stocks of equal ratio. This is where DuPont analysis wins over and spots the better stock.
Investors can simply do this analysis by taking a look at the company's financials.However, looking at financial statements of each company separately can be a tedious task. Screening tools like Zacks Research Wizard can come to your rescue and help you shortlist the stocks that look impressive with a DuPont analysis.
Here are five of the nine stocks that made it through the screen.
Revolve Group: The Zacks Rank #2 e-commerce fashion company markets and sells men's and women's designer apparels, shoes and accessories.
The average earnings surprise of RVLV for the past four quarters is 96.26%.
Olympic Steel: The Zacks Rank #1 company is a leading U.S. metals service center focused on the direct sale and distribution of large volumes of processed carbon, coated and stainless flat-rolled sheet, coil and plate steel and aluminum products.
The average earnings surprise of ZEUS for the past four quarters is 49.65%.
Boise Cascade: The Zacks Rank #1 company operates as a wood products manufacturer and building materials distributor.
The average earnings surprise of BCC for the past four quarters is 48.4%.
Watsco: The Zacks Rank #1 company is the largest distributor of Heating, ventilation and air conditioning equipment, as well as related parts and supplies in North America.
The average earnings surprise of WSO for the past four quarters is 24.31%.
Cross Country Healthcare: The Zacks Rank #1 company is a national leader in providing innovative healthcare workforce solutions and staffing services.
The average earnings surprise of CCRN for the past four quarters is 41.52%.
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.
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For the rest of this Screen of the Week article please visit Zacks.com at: https://www.zacks.com/stock/news/1909966/5-dupont-tested-winning-stocks-to-buy-now
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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Watsco, Inc. (WSO) : Free Stock Analysis Report
Cross Country Healthcare, Inc. (CCRN) : Free Stock Analysis Report
Olympic Steel, Inc. (ZEUS) : Free Stock Analysis Report
Boise Cascade, L.L.C. (BCC) : Free Stock Analysis Report
Revolve Group, Inc. (RVLV) : Free Stock Analysis Report
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