For Immediate Release
Chicago, IL – November 11, 2019 - Stocks in this week’s article are BMC Stock Holdings Inc. BMCH, Ross Stores Inc. ROST, USANA Health Sciences Inc. USNA, Universal Forest Products Inc. UFPI and NVR Inc. NVR.
Bet Big on DuPont Analysis & Pick 5 Quality Stocks
Return on equity is one of the most sought-after metrics used by investors. The metric enables investors to differentiate between a profit-churner and a profit-burner. It is a profitability ratio that measures the earnings that a company generates from its equity.
To shortlist these gems, one can look at the DuPont technique to analyze basic ROE at an advanced level. 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 the Strength of DuPont
The DuPont analysis allows investors to evaluate the elements that are the driving factors in any change in ROE. It can help investors to separate companies having higher margins from those having a high turnover. In fact, it also focuses on the company’s leverage status. A lofty ROE could be due to the overuse of debt. If this is the case, the strength of a company can be uncertain if it has a high debt load.
So, an investor relying solely on basic ROE may be confused if he or she has to judge between two stocks of equal ratio. This is where DuPont analysis wins while finding out the better stock.
Investors can simply do this analysis by taking a look at the company’s financials. However, looking at the 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.
For the rest of this Screen of the Week article please visit Zacks.com at:https://www.zacks.com/stock/news/609745/bet-big-on-dupont-analysis-amp-pick-5-quality-stocks
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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BMC Stock Holdings, Inc. (BMCH) : Free Stock Analysis Report
Universal Forest Products, Inc. (UFPI) : Free Stock Analysis Report
NVR, Inc. (NVR) : Free Stock Analysis Report
USANA Health Sciences, Inc. (USNA) : Free Stock Analysis Report
Ross Stores, Inc. (ROST) : Free Stock Analysis Report
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