Zacks.com featured highlights include ON Semiconductor, Dillard's, Valero Energy, Upbound and AGNC Investment
For Immediate Release
Chicago, IL – October 12, 2023 – Stocks in this week’s article are ON Semiconductor Corp. ON, Dillard's, Inc. DDS, Valero Energy Corp. VLO, Upbound Group, Inc. UPBD and AGNC Investment Corp. AGNC.
Buy 5 Stocks with High ROE as Bond Yields Subside Steadily
Despite an initial setback triggered by the sudden outbreak of the Israel-Hamas war, the U.S. equity markets witnessed a steady uptrend over the past few trading sessions as bond yields subsided. As rising geopolitical tensions and volatility in oil prices forced investors to seek refuge in the less risky bond asset portfolio, bond prices surged while yields fell considerably, propelling the stocks higher.
The uptrend was further buoyed by a solid September jobs report that portrayed a better-than-expected 336,000 job addition. While the unemployment rate was 3.8%, average hourly earnings were up 0.2% for the month and 4.2% from a year ago compared with respective estimates of 0.3% and 4.3%. This partially negated the rate hike fears as the Federal Reserve kept the road ajar for another hike before the end of the year.
As investors employ a wait-and-see approach in a classic example of "backing and filling" in the market, they can benefit from "cash cow" stocks that garner higher returns. However, identifying cash-rich stocks alone does not make for a solid investment proposition unless it is backed by attractive efficiency ratios like return on equity (ROE). A high ROE ensures that the company is reinvesting cash at a high rate of return. ON Semiconductor Corp., Dillard's, Inc., Valero Energy Corp., Upbound Group, Inc. and AGNC Investment Corp. are some of the stocks with high ROE to profit from.
ROE: A Key Metric
ROE = Net Income/Shareholders' Equity
ROE helps investors distinguish profit-generating companies from profit burners and is useful in determining the financial health of a company. In other words, this financial metric enables investors to identify companies 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 multiplying its profits without investing new equity capital and portrays management's efficiency in rewarding shareholders with attractive risk-adjusted returns.
Here are five of the 21 stocks that qualified the screening:
ON Semiconductor: Phoenix, AZ-based onsemi is an original equipment manufacturer of a broad range of discrete and embedded semiconductor components. The company has a very well-diversified business. onsemi generates a significant percentage of revenues from the computing, consumer, industrial, communications and automotive markets.
The stock has a long-term earnings growth expectation of 7.5% and delivered a trailing four-quarter earnings surprise of 8.7%, on average. onsemi carries a Zacks Rank #2.
Dillard's: Founded in 1938, Dillard's is a large departmental store chain featuring fashion apparel and home furnishings. Its merchandise mix consists of both branded and private-label items. The company's strategy is to offer more fashion-forward and trendy products to attract customers.
Dillard's is benefiting from continued momentum in consumer demand and better inventory management. The company delivered a trailing four-quarter earnings surprise of 77.1%, on average. DDS carries a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank stocks here.
Valero: San Antonio, TX-based Valero Energy is the largest independent refiner and marketer of petroleum products in the United States. The company was founded in 1980. It has a refining capacity of 3.1 million barrels per day across 15 refineries throughout the United States, Canada and the United Kingdom.
Valero carries a Zacks Rank #2. It has a long-term earnings growth expectation of 6% and delivered a trailing four-quarter earnings surprise of 9%, on average. It has a VGM Score of A.
Upbound Group: Headquartered in Plano, TX, Upbound Group (formerly Rent-A-Center, Inc.) is a leading lease-to-own provider with operations in the United States, Puerto Rico and Mexico. The company provides services to a large portion of consumers by providing them access and the opportunity to obtain ownership of high-quality, durable products under a flexible lease purchase agreement with no long-term debt obligation.
The company delivered a trailing four-quarter earnings surprise of 25.8%, on average. Upbound Group carries a Zacks Rank #2. It has a VGM Score of A.
AGNC Investment: Previously known as American Capital Agency Corp., AGNC Investment is a real estate investment trust (REIT) that focuses on leveraged investments in Agency residential mortgage-backed securities. This includes residential mortgage pass-through securities and collateralized mortgage obligations.
Atkore carries a Zacks Rank #2. It delivered a trailing four-quarter earnings surprise of 14.8%, on average.
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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/2164172/buy-5-stocks-with-high-roe-as-bond-yields-subside-steadily
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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Dillard's, Inc. (DDS) : Free Stock Analysis Report
Valero Energy Corporation (VLO) : Free Stock Analysis Report
AGNC Investment Corp. (AGNC) : Free Stock Analysis Report
ON Semiconductor Corporation (ON) : Free Stock Analysis Report
Upbound Group, Inc. (UPBD) : Free Stock Analysis Report
