10 Large Cap Stocks With Strong Sources Of Profitability

by: Kapitall

There are tens if not hundreds of different ways to look at a stock's profitability. For ideas on how to go about your analysis, here is a list you might be interested in.

We ran a screen on large-cap stocks (with market caps above $10 billion) for stocks with strong sources of profitability, measured by DuPont analysis.

DuPont analyzes return on equity (ROE, or net income/equity) profitability by breaking ROE up into three components:

= (Net Profit/Equity)
= (Net profit/Sales)*(Sales/Assets)*(Assets/Equity)
= (Net Profit margin)*(Asset turnover)*(Leverage ratio)

It therefore focuses on companies with the following positive 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 with all of these characteristics are experiencing increasing profits due to operations and not to increased use of financial 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 have strong profitability? Use this list as a starting point for your own analysis.

List sorted by increase in ROE.

1. Pioneer Natural Resources Co. (NYSE:PXD): Engages in the exploration and production of oil and gas in the United States, South Africa, and Tunisia. Market cap of $12.03B. MRQ Net Profit Margin increased to 34.07% from 19.12% year-over-year, Sales/Assets increased to 0.09 from 0.06, while Assets/Equity decreased to 2.17 from 2.30. The stock has had a good month, gaining 11.52%.

2. Motorola Solutions, Inc. (NYSE:MSI): Provides business and mission critical communication products and services for enterprise and government customers worldwide. Market cap of $14.76B. MRQ Net Profit Margin increased to 6.08% from 5.77% year-over-year, Sales/Assets increased to 0.14 from 0.07, while Assets/Equity decreased to 2.42 from 2.48. It's been a rough couple of days for the stock, losing 5.64% over the last week.

3. Chevron Corporation (NYSE:CVX): Engages in petroleum, chemicals, mining, power generation, and energy operations worldwide. Market cap of $212.27B. MRQ Net Profit Margin increased to 12.15% from 7.58% year-over-year, Sales/Assets increased to 0.32 from 0.28, while Assets/Equity decreased to 1.69 from 1.73. Offers a good dividend, and appears to have good liquidity to back it up--dividend yield at 3.04%, current ratio at 1.64, and quick ratio at 1.45. The stock has gained 16.17% over the last year.

4. Southern Copper Corp. (NYSE:SCCO): Engages in mining, smelting, and refining mineral properties in Peru, Mexico, and Chile. Market cap of $30.28B. MRQ Net Profit Margin increased to 37.98% from 29.03% year-over-year, Sales/Assets increased to 0.22 from 0.17, while Assets/Equity decreased to 1.95 from 1.96. Exhibiting strong upside momentum--currently trading 8.51% above its SMA20, 14.58% above its SMA50, and 15.4% above its SMA200. The stock has had a good month, gaining 16.05%.

5. FedEx Corporation (NYSE:FDX): Provides transportation, e-commerce, and business services in the United States and internationally. Market cap of $29.16B. MRQ Net Profit Margin increased to 4.69% from 2.94% year-over-year, Sales/Assets increased to 0.3721 from 0.3691, while Assets/Equity decreased to 1.7875 from 1.7920. The stock has lost 1.06% over the last year.

6. Las Vegas Sands Corp. (NYSE:LVS): Develops, and operates various integrated resort properties primarily in the United States, Macau, and Singapore. Market cap of $33.53B. MRQ Net Profit Margin increased to 17.63% from 11.24% year-over-year, Sales/Assets increased to 0.11 from 0.09, while Assets/Equity decreased to 2.68 from 3.07. The stock has had a good month, gaining 12.47%.

7. American Electric Power Co., Inc. (NYSE:AEP): Engages in the generation, transmission, and distribution of electric power to retail customers. Market cap of $19.93B. MRQ Net Profit Margin increased to 21.44% from 13.68% year-over-year, Sales/Assets increased to 0.0847 from 0.0687, while Assets/Equity decreased to 3.48 from 3.64. The stock has gained 19.2% over the last year.

8. Avalonbay Communities Inc. (NYSE:AVB): Engages in the development, redevelopment, acquisition, ownership, and operation of multifamily communities in the United States. Market cap of $12.83B. MRQ Net Profit Margin increased to 17.85% from 10.93% year-over-year, Sales/Assets increased to 0.0296 from 0.0294, while Assets/Equity decreased to 2.05 from 2.33. The stock is a short squeeze candidate, with a short float at 8.71% (equivalent to 10.54 days of average volume). The stock has had a couple of great days, gaining 6.14% over the last week.

9. priceline.com Incorporated (NASDAQ:PCLN): Operates as an online travel company. Market cap of $26.12B. MRQ Net Profit Margin increased to 32.32% from 22.26% year-over-year, Sales/Assets increased to 0.38 from 0.36, while Assets/Equity decreased to 1.60 from 1.68. The stock has gained 24.12% over the last year.

10. The Dow Chemical Company (NYSE:DOW): Manufactures and supplies products used as raw materials in the production of customer products and services worldwide. Market cap of $39.48B. MRQ Net Profit Margin increased to 5.96% from 4.64% year-over-year, Sales/Assets increased to 0.23 from 0.19, while Assets/Equity decreased to 2.77 from 3.01. This is a risky stock that is significantly more volatile than the overall market (beta = 2.33). The stock has had a good month, gaining 16.86%.

*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.