Do you believe in the power of the US consumer? For a closer look at stocks affected by consumer spending, we ran a screen.
We began by screening the consumer goods sector for stocks with high sales growth, with over 15% growth in sales over the last 5 years. We then screened these names for those with strong profitability as indicated by DuPont analysis.
DuPont breaks down return on equity (ROE) profitability into three sources:
= (Net Profit/Equity)
= (Net profit/Sales)*(Sales/Assets)*(Assets/Equity)
= (Net Profit margin)*(Asset turnover)*(Leverage ratio)
Because increases in net margin and asset turnover are considered positive things, DuPont focuses on companies with these 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)
Those companies that pass DuPont are seeing positive trends in the sources of their increasing profitability, which adds further weight to the idea that the names are profitable.
Interactive Chart: Press Play to compare changes in market cap over the last two years for the stocks mentioned below. Analyst ratings sourced from Zacks Investment Research.
Do you think these names will continue to see growing profits and sales? Use this list as a starting point for your own analysis.
List sorted by sales growth over the last 5 years.
1. Phillips-Van Heusen Corp. (PVH): Designs and markets branded dress shirts, neckwear, sportswear, footwear, and other related products worldwide. Market cap at $6.18B. Price at $89.25. Sales growth over the last 5 years at 23.02%. MRQ net profit margin at 5.3% vs. 3.73% y/y. MRQ sales/assets at 0.227 vs. 0.206 y/y. MRQ assets/equity at 2.487 vs. 2.778 y/y.
2. Vera Bradley Designs, Inc. (VRA): Engages in the design, production, marketing, and retail of functional accessories for women under the Vera Bradley brand. Market cap at $1.10B. Price at $26.50. Sales growth over the last 5 years at 19.50%. MRQ net profit margin at 14.94% vs. 13.01% y/y. MRQ sales/assets at 0.613 vs. 0.531 y/y. MRQ assets/equity at 1.77 vs. 3.203 y/y.
3. Corn Products International Inc. (CPO): Manufactures and sells various ingredients to food and industrial customers in North America, South America, Asia, Africa, and Europe. Market cap at $4.34B. Price at $56.70. Sales growth over the last 5 years at 18.86%. MRQ net profit margin at 6.14% vs. 3.68% y/y. MRQ sales/assets at 0.291 vs. 0.279 y/y. MRQ assets/equity at 2.527 vs. 2.552 y/y.
4. Treehouse Foods, Inc. (THS): Operates as a food manufacturing company servicing primarily the retail grocery and foodservice distribution channels in the United States and Canada. Market cap at $2.10B. Price at $57.62. Sales growth over the last 5 years at 16.89%. MRQ net profit margin at 5.57% vs. 5.51% y/y. MRQ sales/assets at 0.223 vs. 0.213 y/y. MRQ assets/equity at 2.24 vs. 2.445 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.