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Find Top Stocks to Buy in August that are Efficiently Generating Profits
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The S&P 500 and the Nasdaq posted their fifth straight monthly gains in July as investors continued to price in an eventual earnings comeback and lower interest rates. Stocks began the first day of August slightly lower as Wall Street turns its attention to some big reports and economic data later this week.
The July jobs report is due out on Friday morning. The U.S. economy is projected to have added 200K jobs in July vs. 209K in June. On top of that, Apple and Amazon are set to report on Thursday, August 3, as we enter the thick of corporate earnings season.
The bulls will likely need to see lower-than-projected jobs figures and slowing wages to help keep pushing the market higher in the near term. Anything hot on the jobs front could signal that the Fed has slightly more work to do. Apple and other giants will need to provide upbeat guidance since the market has bet on the earnings picture turning around in the back half of 2023 and in a big way next year.
The market remains on sturdy ground at the moment. But some profit-taking seems likely, and more investors might start to grow weary of buying big tech stocks that have already skyrocketed.
But that doesn’t mean investors should stay on the sidelines since 2023 has already proven how difficult market timing can be. Instead, let’s explore how to find ‘Strong Buy’ stocks with proven records of efficiently generating profits that investors might want to buy in August.
ROE
Return on Equity or ROE helps investors understand if a firm’s executives are creating assets with investors’ cash or burning it. ROE shows a company’s ability to turn assets into profits. Put another way, this vital metric measures the profits made for each dollar of shareholder equity.
ROE is calculated as net income / shareholder's equity. For example: if $0.10 of assets are created for each $1 of shareholder equity that would equal a ROE of 10%.
Overall, Return on Equity is a great item to use regardless of what type of investor you are since it provides insight into management’s ability to create value and keep costs under control. Plus, if ROE slips, it can alert us to potential problems.
With all that said, let’s take a look at this screen’s parameters and see the companies proving they can return value to shareholders instead of churning through their cash…
• Zacks Rank equal to 1
The Zacks Rank looks at upward earnings estimate revisions, among other metrics, in order to find companies that are projected to see their earnings get stronger. In fact, beginning with a Zacks Rank #1 can be a great starting point because it boasts an average annual return of over 25% per year during the last 30 years.
• Price greater than or equal to 5
Today we ruled out any stocks that are trading for less than $5 a share because they can be more volatile and speculative.
• Price/Sales Ratio less than or equal to 1
On top of that, we are looking for a low price to sales ratio. Today we went with 1 or below as this range is usually thought to provide better value since investors pay less for each unit of sales.
• % (Broker) Rating Strong Buy equal to 100 (%)
In this screen, we decided to go with companies that brokers are fully on board with since ratings are typically skewed strongly toward ‘buy’ and ‘strong buy.’
• ROE greater than or equal to 10
Lastly, but most importantly for today’s screen, we got rid of any companies with Return on Equity of less than 10 because the median ROE value for all of the stocks in the Zacks Universe is under 10.
Here are two of the five stocks that made it through today’s screen…
Arcos Dorados is the world’s largest independent McDonald’s ((MCD - Free Report) ) franchisee. Arcos Dorados runs the biggest quick service restaurant chain in Latin America and the Caribbean, operating over 2,300 restaurants. Plus, Arcos Dorados has the exclusive right to own, operate, and grant franchises of McDonald’s restaurants in 20 Latin American and Caribbean countries and territories.
Arcos Dorados crushed our Q1 FY23 earnings estimate by 50% and its earnings outlook for FY23 and FY24 continues to improve to help it land a Zacks Rank #1 (Strong Buy). Zacks estimates call for ARCO’s adjusted earnings to climb 10% in FY23 and another 11% in FY24 on the back of 16% and 9% higher sales.
Image Source: Zacks Investment Research
Arcos Dorados stock has surged 140% over the last three years, including a 50% run in the trailing 12 months to easily top its highly-ranked Zacks Retail – Restaurants industry. Arcos Dorados also trades at a 44% discount to its industry at 13.9X forward 12-month earnings. ARCO’s dividend yields 1.7% at the moment, and it has an ROE of 55%.
M/I Homes is one of the nation's leading builders of single-family homes. MHO delivered 8,366 homes in 2022 and posted record revenue of $4.1 billion. M/I Homes boasts a diversified customer base including first-time, move-up, and active adult buyers, operating in roughly 17 markets across 10 states from Chicago to Austin, Texas. MHO has been "opportunistically adding new markets" since 2015 such as Nashville.
M/I Homes, like many other homebuilders, is benefitting from long-term demographic trends and the ongoing undersupply of single-family homes that has kept demand high, with buyers realizing mortgage rates aren’t likely to fall back down the Covid levels again. Plus, M/I Homes and others didn’t overbuild during the Covid boom.
Image Source: Zacks Investment Research
M/I Homes crushed our Q2 earnings estimate by 68% on July 26 to extend its impressive streak of big bottom-line beats. MHO’s earnings outlook has soared since its release, with it also projected to post revenue growth both this year and next.
M/I Homes stock has soared 360% in the last 10 years to top its highly-ranked Zacks industry’s 260%, with MHO up 115% YTD. Despite the run and outperformance, MHO trades at a 62% discount to its own decade-long highs at 5.7X forward 12-month earnings and 40% below its industry. And it boasts an ROE of over 23% at the moment.
Get the rest of the stocks on this list and start looking for the newest companies that fit these criteria. It's easy to do. And it could help you find your next big winner. Start screening for these companies today with a free trial to the Research Wizard. You can do it.
Want more articles from this author? Scroll up to the top of this article and click the FOLLOW AUTHOR button to get an email each time a new article is published.
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.
Zacks Restaurant Recommendations: In addition to dining at these special places, you can feast on their stock shares. A Zacks Special Report spotlights 5 recent IPOs to watch plus 2 stocks that offer immediate promise in a booming sector. Download it free »
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The S&P 500 and the Nasdaq posted their fifth straight monthly gains in July as investors continued to price in an eventual earnings comeback and lower interest rates. Stocks began the first day of August slightly lower as Wall Street turns its attention to some big reports and economic data later this week.
The July jobs report is due out on Friday morning. The U.S. economy is projected to have added 200K jobs in July vs. 209K in June. On top of that, Apple and Amazon are set to report on Thursday, August 3, as we enter the thick of corporate earnings season.
The bulls will likely need to see lower-than-projected jobs figures and slowing wages to help keep pushing the market higher in the near term. Anything hot on the jobs front could signal that the Fed has slightly more work to do. Apple and other giants will need to provide upbeat guidance since the market has bet on the earnings picture turning around in the back half of 2023 and in a big way next year.
The market remains on sturdy ground at the moment. But some profit-taking seems likely, and more investors might start to grow weary of buying big tech stocks that have already skyrocketed.
But that doesn’t mean investors should stay on the sidelines since 2023 has already proven how difficult market timing can be. Instead, let’s explore how to find ‘Strong Buy’ stocks with proven records of efficiently generating profits that investors might want to buy in August.
ROE
Return on Equity or ROE helps investors understand if a firm’s executives are creating assets with investors’ cash or burning it. ROE shows a company’s ability to turn assets into profits. Put another way, this vital metric measures the profits made for each dollar of shareholder equity.
ROE is calculated as net income / shareholder's equity. For example: if $0.10 of assets are created for each $1 of shareholder equity that would equal a ROE of 10%.
Overall, Return on Equity is a great item to use regardless of what type of investor you are since it provides insight into management’s ability to create value and keep costs under control. Plus, if ROE slips, it can alert us to potential problems.
With all that said, let’s take a look at this screen’s parameters and see the companies proving they can return value to shareholders instead of churning through their cash…
• Zacks Rank equal to 1
The Zacks Rank looks at upward earnings estimate revisions, among other metrics, in order to find companies that are projected to see their earnings get stronger. In fact, beginning with a Zacks Rank #1 can be a great starting point because it boasts an average annual return of over 25% per year during the last 30 years.
• Price greater than or equal to 5
Today we ruled out any stocks that are trading for less than $5 a share because they can be more volatile and speculative.
• Price/Sales Ratio less than or equal to 1
On top of that, we are looking for a low price to sales ratio. Today we went with 1 or below as this range is usually thought to provide better value since investors pay less for each unit of sales.
• % (Broker) Rating Strong Buy equal to 100 (%)
In this screen, we decided to go with companies that brokers are fully on board with since ratings are typically skewed strongly toward ‘buy’ and ‘strong buy.’
• ROE greater than or equal to 10
Lastly, but most importantly for today’s screen, we got rid of any companies with Return on Equity of less than 10 because the median ROE value for all of the stocks in the Zacks Universe is under 10.
Here are two of the five stocks that made it through today’s screen…
Arcos Dorados Holdings Inc. ((ARCO - Free Report) )
Arcos Dorados is the world’s largest independent McDonald’s ((MCD - Free Report) ) franchisee. Arcos Dorados runs the biggest quick service restaurant chain in Latin America and the Caribbean, operating over 2,300 restaurants. Plus, Arcos Dorados has the exclusive right to own, operate, and grant franchises of McDonald’s restaurants in 20 Latin American and Caribbean countries and territories.
Arcos Dorados crushed our Q1 FY23 earnings estimate by 50% and its earnings outlook for FY23 and FY24 continues to improve to help it land a Zacks Rank #1 (Strong Buy). Zacks estimates call for ARCO’s adjusted earnings to climb 10% in FY23 and another 11% in FY24 on the back of 16% and 9% higher sales.
Image Source: Zacks Investment Research
Arcos Dorados stock has surged 140% over the last three years, including a 50% run in the trailing 12 months to easily top its highly-ranked Zacks Retail – Restaurants industry. Arcos Dorados also trades at a 44% discount to its industry at 13.9X forward 12-month earnings. ARCO’s dividend yields 1.7% at the moment, and it has an ROE of 55%.
M/I Homes, Inc. ((MHO - Free Report) )
M/I Homes is one of the nation's leading builders of single-family homes. MHO delivered 8,366 homes in 2022 and posted record revenue of $4.1 billion. M/I Homes boasts a diversified customer base including first-time, move-up, and active adult buyers, operating in roughly 17 markets across 10 states from Chicago to Austin, Texas. MHO has been "opportunistically adding new markets" since 2015 such as Nashville.
M/I Homes, like many other homebuilders, is benefitting from long-term demographic trends and the ongoing undersupply of single-family homes that has kept demand high, with buyers realizing mortgage rates aren’t likely to fall back down the Covid levels again. Plus, M/I Homes and others didn’t overbuild during the Covid boom.
Image Source: Zacks Investment Research
M/I Homes crushed our Q2 earnings estimate by 68% on July 26 to extend its impressive streak of big bottom-line beats. MHO’s earnings outlook has soared since its release, with it also projected to post revenue growth both this year and next.
M/I Homes stock has soared 360% in the last 10 years to top its highly-ranked Zacks industry’s 260%, with MHO up 115% YTD. Despite the run and outperformance, MHO trades at a 62% discount to its own decade-long highs at 5.7X forward 12-month earnings and 40% below its industry. And it boasts an ROE of over 23% at the moment.
Get the rest of the stocks on this list and start looking for the newest companies that fit these criteria. It's easy to do. And it could help you find your next big winner. Start screening for these companies today with a free trial to the Research Wizard. You can do it.
Click here to sign up for a free trial to the Research Wizard today.
Want more articles from this author? Scroll up to the top of this article and click the FOLLOW AUTHOR button to get an email each time a new article is published.
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.
Disclosure: Performance information for Zacks’ portfolios and strategies are available at: https://www.zacks.com/performance/
Zacks Restaurant Recommendations: In addition to dining at these special places, you can feast on their stock shares. A Zacks Special Report spotlights 5 recent IPOs to watch plus 2 stocks that offer immediate promise in a booming sector. Download it free »