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Zacks.com featured highlights: Sanderson Farms, American Woodmark,TJX Companies, Best Buy and PetMed Express

For Immediate Release

Chicago, IL –July 20, 2017 - Stocks in this week’s article include Sanderson Farms Inc. (NASDAQ: SAFM Free Report) , American Woodmark Corp. ( NASDAQ: AMWD Free Report),TJX Companies Inc. (NYSE: TJX Free Report), Best Buy Co. Inc. (NYSE: BBY Free Report) and PetMed Express Inc. (NASDAQ: PETS Free Report) .

5 Top-Ranked Stocks Emerge as DuPont Winners

Return on equity is one of the most sought-after metrics for an investment. 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 the 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

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.

Screening Parameters

Profit Margin more than or equal to 3: As the name suggests, it is a measure of how profitably the business is running. Generally, it is the key contributor to ROE.

Asset Turnover Ratio more than or equal to 2: It allows an investor to assess management’s efficiency in using assets to drive sales.

Equity Multiplier between 1 and 3: It’s an indication of how much debt the company uses to finance its assets.

Zacks Rank less than or equal to 2: Stocks having a Zacks Rank #1 (Strong Buy) or 2 (Buy) generally perform better than their peers in all types of market environment.

Current Price more than $5: This screens out the low priced stocks. However, when looking for lower priced stocks, this criterion can be removed.

Here are five of 20 stocks that made it through the screen:

Sanderson Farms Inc. (NASDAQ: SAFM Free Report ) : This Zacks Rank #1 company is a poultry processing company. Its Zacks Industry Rank is in the top 5%. You can see the complete list of today’s Zacks #1 Rank stocks here .

American Woodmark Corp. ( NASDAQ: AMWD Free Report ): The Zacks Rank #2 company manufactures and distributes kitchen cabinets and vanities for remodeling. Its Zacks Industry Rank is in the top 18%.

TJX Companies Inc. (NYSE: TJX Free Report ): It is the leading off-price retailer of apparel and home fashion in the U.S. and worldwide. Its Zacks Industry Rank is in the top 18%. The stock has a Zacks Rank #2.

Best Buy Co. Inc. ( NYSE: BBY Free Report ): The company is a leading retailer with a Zacks Rank #1 and a VGM score of A. Its Zacks Industry Rank is in the top 2%.

PetMed Express Inc. (NASDAQ: PETS Free Report ): This is the largest pet pharmacy, delivering prescription and non-prescription pet medications. It has a Zacks Rank #1 and the Zacks Industry Rank is in the top 18%.

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.

Click here to sign up for a free trial to the Research Wizard today .

About Screen of the Week

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Sanderson Farms, Inc. (SAFM): Free Stock Analysis Report
 
American Woodmark Corporation (AMWD): Free Stock Analysis Report
 
TJX Companies, Inc. (The) (TJX): Free Stock Analysis Report
 
Best Buy Co., Inc. (BBY): Free Stock Analysis Report
 
PetMed Express, Inc. (PETS): Free Stock Analysis Report
 
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