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Over 800 companies are reporting their third-quarter earnings next week – do you have a watch list prepared?

For ideas, we ran a screen on next week’s reporting companies that are rallying above their 20-day, 50-day, and 200-day moving averages for those with strong profitability, indicated by DuPont analysis of return on equity (ROE) profitability.

ROE can be broken up into three components such that increases in ROE can be attributed to those components.

ROE

= (Net Profit/Equity)

= (Net profit/Sales)*(Sales/Assets)*(Assets/Equity)

= (Net Profit margin)*(Asset turnover)*(Leverage ratio)

Analyzing the sources of returns for a company, we can focus on companies with the following characteristics: Increasing ROE along with,

  • Decreasing leverage, i.e. decreasing Asset/Equity ratio
  • Improving asset use efficiency (i.e. increasing Sales/Assets ratio) and improving net profit margin (i.e. increasing Net Income/Sales ratio)

Companies passing all requirements are thus experiencing increasing profits due to operations and not to increased use of leverage.

‪Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the top six stocks mentioned below. Analyst ratings sourced from Zacks Investment Research.‬‬

We also created a price-weighted index of the stocks mentioned below, and monitored the performance of the list relative to the S&P 500 index over the last month. To access a complete analysis of this list's recent performance, click here.

Do you think these companies will report strong earnings? Use this list as a starting-off point for your own analysis.

List sorted by increase in ROE.

1. American States Water Company (NYSE:AWR): Provides water, electric, and contracted services in the United States. Market cap of $650.81M. The stock is currently trading 1.14% above its 20-day moving average, 2.26% above its 50-day MA, and 3.42% above its 200-day MA. Earnings to be released on 11/07. MRQ Net Profit Margin increased to 14.53% from 9.39% year-over-year, Sales/Assets increased to 0.09 from 0.08, while Assets/Equity decreased to 3.05 from 3.14. The stock has lost 3.68% over the last year.

2. Independence Holding Co. (NYSE:IHC): Engages in the life and health insurance business in the United States, the District of Columbia, the Virgin Islands, Guam, and Puerto Rico. Market cap of $140.73M. The stock is currently trading 7.03% above its 20-day moving average, 10.88% above its 50-day MA, and 0.97% above its 200-day MA. Earnings to be released on 11/07. MRQ Net Profit Margin increased to 2.88% from 1.60% year-over-year, Sales/Assets increased to 0.0777 from 0.0766, while Assets/Equity decreased to 5.50 from 6.09. The stock is a short squeeze candidate, with a short float at 5.3% (equivalent to 21.02 days of average volume). The stock has had a couple of great days, gaining 7.11% over the last week.

3. Panhandle Oil and Gas Inc. (NYSE:PHX): Engages in the acquisition, management, exploration, and development of oil and natural gas properties. Market cap of $289.33M. The stock is currently trading 10.43% above its 20-day moving average, 15.44% above its 50-day MA, and 14.28% above its 200-day MA. Earnings to be released on 11/08. MRQ Net Profit Margin increased to 22.67% from 14.44% year-over-year, Sales/Assets increased to 0.11 from 0.10, while Assets/Equity decreased to 1.4267 from 1.4268. The stock has had a couple of great days, gaining 9.8% over the last week.

4. Pennichuck Corp. (NASDAQ:PNNW): Engages in the collection, storage, treatment, and distribution of potable water for domestic, industrial, commercial, and fire protection service markets primarily in New Hampshire. Market cap of $133.85M. The stock is currently trading 0.48% above its 20-day moving average, 0.41% above its 50-day MA, and 1.23% above its 200-day MA. Earnings to be released on 11/07. MRQ Net Profit Margin increased to 15.55% from 10.95% year-over-year, Sales/Assets increased to 0.06 from 0.05, while Assets/Equity decreased to 3.24 from 3.25. The stock has gained 22.01% over the last year.

5. Priceline.com Incorporated (NASDAQ:PCLN): Operates as an online travel company. Market cap of $26.06B. The stock is currently trading 5.14% above its 20-day moving average, 2.03% above its 50-day MA, and 3.40% above its 200-day MA. Earnings to be released on 11/07. MRQ Net Profit Margin increased to 23.25% from 14.98% year-over-year, Sales/Assets increased to 0.33 from 0.31, while Assets/Equity decreased to 1.69 from 1.77. The stock has had a couple of great days, gaining 5.7% over the last week.

6. Connecticut Water Service Inc. (NASDAQ:CTWS): Operates as a regulated water company in Connecticut. Market cap of $235.44M. The stock is currently trading 2.46% above its 20-day moving average, 3.33% above its 50-day MA, and 7.30% above its 200-day MA. Earnings to be released on 11/09. MRQ Net Profit Margin increased to 19.99% from 14.53% year-over-year, Sales/Assets increased to 0.0403 from 0.0378, while Assets/Equity decreased to 3.70 from 3.83. The stock has gained 14.7% over the last year.

7. Macy's, Inc. (NYSE:M): Operates department stores and Internet Web sites in the United States. Market cap of $13.44B. The stock is currently trading 6.67% above its 20-day moving average, 13.67% above its 50-day MA, and 18.00% above its 200-day MA. Earnings to be released on 11/09. MRQ Net Profit Margin increased to 4.06% from 2.65% year-over-year, Sales/Assets increased to 0.29 from 0.27, while Assets/Equity decreased to 3.44 from 4.22. The stock has had a couple of great days, gaining 5.43% over the last week.

8. Primoris Services Corporation (NASDAQ:PRIM): A specialty contractor and infrastructure company that provides a range of construction, fabrication, maintenance, replacement, water and wastewater, and product engineering services. Market cap of $710.24M. The stock is currently trading 13.68% above its 20-day moving average, 23.56% above its 50-day MA, and 27.14% above its 200-day MA. Earnings to be released on 11/07. MRQ Net Profit Margin increased to 4.11% from 3.49% year-over-year, Sales/Assets increased to 0.52 from 0.41, while Assets/Equity decreased to 2.77 from 3.14. The stock is a short squeeze candidate, with a short float at 6% (equivalent to 9.98 days of average volume). The stock has had a couple of great days, gaining 8.76% over the last week.

9. Rackspace Hosting, Inc. (NYSE:RAX): Operates in the hosting and cloud computing industry. Market cap of $5.54B. The stock is currently trading 10.85% above its 20-day moving average, 15.29% above its 50-day MA, and 7.69% above its 200-day MA. Earnings to be released on 11/07. MRQ Net Profit Margin increased to 7.10% from 5.98% year-over-year, Sales/Assets increased to 0.28 from 0.26, while Assets/Equity decreased to 1.73 from 1.81. The stock is a short squeeze candidate, with a short float at 10.28% (equivalent to 6.12 days of average volume). The stock has had a couple of great days, gaining 10.2% over the last week.

10. Isramco Inc. (NASDAQ:ISRL): Engages in the acquisition, development, production, and exploration of onshore oil and natural gas properties in the United States. Market cap of $241.81M. The stock is currently trading 8.04% above its 20-day moving average, 18.57% above its 50-day MA, and 20.30% above its 200-day MA. Earnings to be released on 11/07. MRQ Net Profit Margin increased to 11.06% from 10.18% year-over-year, Sales/Assets increased to 0.07 from 0.06, while Assets/Equity decreased to 9.06 from 10.65. The stock is a short squeeze candidate, with a short float at 5.8% (equivalent to 29.68 days of average volume). The stock has had a couple of great days, gaining 23.35% over the last week.

11. Nordstrom Inc. (NYSE:JWN): A fashion specialty retailer that offers apparel, shoes, cosmetics, and accessories for women, men, and children in the United States. Market cap of $10.88B. The stock is currently trading 1.39% above its 20-day moving average, 8.53% above its 50-day MA, and 11.79% above its 200-day MA. Earnings to be released on 11/10. MRQ Net Profit Margin increased to 6.23% from 5.81% year-over-year, Sales/Assets increased to 0.36 from 0.34, while Assets/Equity decreased to 3.86 from 4.03. The stock has gained 35.55% over the last year.

12. LMI Aerospace Inc. (NASDAQ:LMIA): Provides design engineering services, structural assemblies, kits, and components to the aerospace, defense, and technology markets primarily in the United States. Market cap of $245.20M. The stock is currently trading 9.49% above its 20-day moving average, 11.28% above its 50-day MA, and 3.09% above its 200-day MA. Earnings to be released on 11/08. MRQ Net Profit Margin increased to 6.27% from 5.97% year-over-year, Sales/Assets increased to 0.33 from 0.31, while Assets/Equity decreased to 1.20 from 1.25. The stock has had a couple of great days, gaining 11.03% over the last week.

13. DCP Midstream Partners LP (NYSE:DPM): Engages in gathering, compressing, treating, processing, transporting, storing, and selling natural gas in the United States. Market cap of $1.91B. The stock is currently trading 8.90% above its 20-day moving average, 12.60% above its 50-day MA, and 11.06% above its 200-day MA. Earnings to be released on 11/07. MRQ Net Profit Margin increased to 11.09% from 9.30% year-over-year, Sales/Assets increased to 0.21 from 0.20, while Assets/Equity decreased to 2.99 from 3.72. The stock has had a couple of great days, gaining 6.14% over the last week.

14. Innophos Holdings Inc (NASDAQ:IPHS): Produces and sells specialty phosphates primarily in North America. Market cap of $985.31M. The stock is currently trading 2.53% above its 20-day moving average, 7.78% above its 50-day MA, and 3.76% above its 200-day MA. Earnings to be released on 11/07. MRQ Net Profit Margin increased to 10.29% from 9.57% year-over-year, Sales/Assets increased to 0.3044 from 0.3004, while Assets/Equity decreased to 1.79 from 1.92. The stock has had a good month, gaining 14.64%.

*Accounting data sourced from Google Finance, all other data sourced from Finviz.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Source: 14 Rallying Stocks Reporting Earnings Next Week With Strong Sources Of Profitability