Table of Contents
For Immediate Release
Chicago, IL – August 14, 2020 – Stocks in this week’s article are Lam Research Corporation LRCX, Best Buy Co., Inc. BBY, T. Rowe Price Group, Inc. TROW, Cadence Design Systems, Inc. CDNS and KLA Corporation KLAC.
5 ROE Picks to Profit as Markets Appear to Defy the Odds
The U.S. equity markets seem to have defied the broader economic downturn and hit pre-pandemic record highs buoyed by broad-based growth across almost all sectors. With a better-than-expected performance in the June quarter earnings season from the firms that have reported so far, the markets appear set to ride the growth momentum.
However, lack of consensus regarding additional government stimulus to fund the federal aid for millions of Americans affected by the virus outbreak remains a threat for the upsurge. Strained Sino-U.S. ties on diplomatic discord and rising cases of coronavirus were additional headwinds.
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.
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 stocks 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.
For the rest of this Screen of the Week article please visit Zacks.com at: https://www.zacks.com/stock/news/1041322/5-roe-picks-to-profit-as-markets-appear-to-defy-the-odds
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Contact: Jim Giaquinto
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Best Buy Co., Inc. (BBY): Free Stock Analysis Report
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Lam Research Corporation (LRCX): Free Stock Analysis Report
T. Rowe Price Group, Inc. (TROW): Free Stock Analysis Report
Cadence Design Systems, Inc. (CDNS): Free Stock Analysis Report
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