Do you prefer stocks that you believe are poised to see big growth? For ideas on how to search for such names, we ran a screen.
We began with high-growth names, with 5-year projected EPS growth above 20%. We then screened for those that also appear attractively priced, with PEG below 1.
Finally, we ran DuPont analysis on these names to find those with strong sources of increasing return on equity (ROE) profitability.
DuPont analyzes return on equity (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. The companies listed below have all three positive attributes found from DuPont.
Interactive Chart: Press Play to compare changes in market cap over the last two years for the top six stocks mentioned below. Analyst ratings sourced from Zacks Investment Research.
Do you think these stocks will see the big growth analysts are expecting? Use this list as a starting point for your own analysis.
Important note: This list is sorted by PEG. Stocks with lower PEG ratios appear more undervalued relative to earnings growth.
1. Nacco Industries Inc. (NC): Engages in lift trucks, small appliances, specialty retail, and mining businesses primarily in the Americas, Europe, and the Asia-Pacific. Market cap at $1.00B. Price at $116.55. PEG at 0.29. MRQ net profit margin at 5.72% vs. 4.43% y/y. MRQ sales/assets at 0.528 vs. 0.522 y/y. MRQ assets/equity at 3.126 vs. 3.707 y/y.
2. Modine Manufacturing Company (MOD): Engages in the development, manufacture, and marketing of thermal management products, components, and systems for use in on-highway and off-highway original equipment manufacturer vehicular applications, and to various building, industrial, refrigeration, and fuel cell markets. Market cap at $420.57M. Price at $8.82. PEG at 0.4. MRQ net profit margin at 2.22% vs. 1.54% y/y. MRQ sales/assets at 0.44 vs. 0.425 y/y. MRQ assets/equity at 2.395 vs. 2.563 y/y.
3. Gulfmark Offshore, Inc. (GLF): Runs a worldwide fleet of vessels offering marine specialty services to offshore oil and natural gas drilling rigs and platforms. Market cap at $1.24B. Price at $46.50. PEG at 0.5. MRQ net profit margin at 23.67% vs. 17.35% y/y. MRQ sales/assets at 0.067 vs. 0.06 y/y. MRQ assets/equity at 1.505 vs. 1.553 y/y.
4. CONSOL Energy Inc. (CNX): Engages in the production of multi-fuel energy and provision of energy services primarily to the electric power generation industry in the United States. Market cap at $7.93B. Price at $33.87. PEG at 0.61. MRQ net profit margin at 12.69% vs. 7.7% y/y. MRQ sales/assets at 0.123 vs. 0.112 y/y. MRQ assets/equity at 3.469 vs. 4.099 y/y.
5. EOG Resources, Inc. (EOG): Engages in the exploration, development, production, and marketing of natural gas and crude oil primarily in the United States, Canada, the Republic of Trinidad, Tobago, the United Kingdom, and the People's Republic of China. Market cap at $30.53B. Price at $112.57. PEG at 0.65. MRQ net profit margin at 4.35% vs. 3% y/y. MRQ sales/assets at 0.112 vs. 0.083 y/y. MRQ assets/equity at 1.965 vs. 2.113 y/y.
6. TriMas Corporation (TRS): Designs, manufacturers, and distributes various products for commercial, industrial, and consumer markets worldwide. Market cap at $826.51M. Price at $23.00. PEG at 0.73. MRQ net profit margin at 5.1% vs. 2.68% y/y. MRQ sales/assets at 0.263 vs. 0.23 y/y. MRQ assets/equity at 5.677 vs. 8.242 y/y.
7. Questcor Pharmaceuticals, Inc. (QCOR): Provides prescription drugs for central nervous system and inflammatory disorders. Market cap at $2.43B. Price at $39.82. PEG at 0.77. MRQ net profit margin at 41.89% vs. 21.91% y/y. MRQ sales/assets at 0.274 vs. 0.193 y/y. MRQ assets/equity at 1.255 vs. 1.265 y/y.
8. Team Inc. (TISI): Provides specialty maintenance and construction services for maintaining high temperature and high pressure piping systems and vessels that are primarily utilized in heavy industries. Market cap at $658.87M. Price at $32.75. PEG at 0.78. MRQ net profit margin at 6.53% vs. 6.05% y/y. MRQ sales/assets at 0.435 vs. 0.417 y/y. MRQ assets/equity at 1.651 vs. 1.733 y/y.
9. Beacon Roofing Supply Inc. (BECN): Distributes residential and non-residential roofing materials in the United States and Canada. Market cap at $1.20B. Price at $25.60. PEG at 0.84. MRQ net profit margin at 3.9% vs. 2.48% y/y. MRQ sales/assets at 0.425 vs. 0.389 y/y. MRQ assets/equity at 2.039 vs. 2.149 y/y.
10. BE Aerospace Inc. (BEAV): Engages in the design, manufacture, sale, and service of commercial aircraft and business jet cabin interior products worldwide. Market cap at $4.85B. Price at $46.61. PEG at 0.97. MRQ net profit margin at 8.75% vs. 5.76% y/y. MRQ sales/assets at 0.171 vs. 0.159 y/y. MRQ assets/equity at 2.049 vs. 2.131 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.