Do you like to trade with a stock's technical momentum patterns? If so, here's a list you might be interested in.
We ran a screen on stocks reporting their quarterly earnings next week for those exhibiting the technical "golden cross" signal, in which a stock's 50-day moving average has crossed above its 200-day MA.
We then ran DuPont analysis on these names to find those with strong sources of profitability.
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 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 stocks will continue to see upward momentum? Use this list as a starting point for your own analysis.
1. LB Foster Co. (FSTR): SMA50 at $29.12 and SMA200 at $29.00 (current price at $32.14). Earnings to be released on 02/20. MRQ net profit margin at 5.99% vs. 5.18% y/y. MRQ sales/assets at 0.433 vs. 0.355 y/y. MRQ assets/equity at 1.414 vs. 1.422 y/y.
2. Lumber Liquidators Holdings, Inc. (LL): Operates as a specialty retailer of hardwood flooring in the United States. SMA50 at $18.99 and SMA200 at $18.91 (current price at $22.29). Earnings to be released on 02/22. MRQ net profit margin at 3.92% vs. 2.91% y/y. MRQ sales/assets at 0.651 vs. 0.628 y/y. MRQ assets/equity at 1.293 vs. 1.352 y/y.
3. Stone Energy Corp. (SGY): Engages in the acquisition, exploration, exploitation, development, and operation of oil and gas properties located in the Gulf of Mexico and Appalachia region. SMA50 at $27.60 and SMA200 at $26.99 (current price at $34.11). Earnings to be released on 02/22. MRQ net profit margin at 24.33% vs. 12.47% y/y. MRQ sales/assets at 0.109 vs. 0.099 y/y. MRQ assets/equity at 2.949 vs. 3.548 y/y.
4. SS&C Technologies Holdings, Inc. (SSNC): Provides software products and software-enabled services to the financial service providers worldwide. SMA50 at $18.02 and SMA200 at $17.53 (current price at $19.05). Earnings to be released on 02/21. MRQ net profit margin at 15.8% vs. 11.87% y/y. MRQ sales/assets at 0.076 vs. 0.067 y/y. MRQ assets/equity at 1.309 vs. 1.504 y/y.
*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.