Interested in gaining exposure to consumer spending trends? For a closer look at stocks of the consumer goods sector, we ran a screen.
We began by screening the consumer goods sector for stocks that appear undervalued relative to earnings growth, with PEG below 1.
Then to analyze these companies' profitability, we ran DuPont analysis on the names. DuPont analyzes profitability by breaking up return on equity (net income/equity) into three components:
= (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 good things, DuPont focuses on companies with these 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)
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 analyst ratings over the last two years for six of the stocks mentioned below. Analyst ratings sourced from Zacks Investment Research.
Do you think these companies have strong profitability? Use this list as a starting point for your own analysis.
List sorted by PEG.
1. Meritor, Inc. (MTOR): Provides drivetrain mobility and braking solutions for original equipment manufacturers of trucks, trailers, and specialty vehicles. Market cap at $517.19M, most recent closing price at $5.26. PEG at 0.13. MRQ net profit margin at 1.72% vs. 1.45% y/y. MRQ sales/assets at 0.452 vs. 0.44 y/y. MRQ assets/equity at -2.604 vs. -2.557 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 $302.34M, most recent closing price at $6.32. PEG at 0.29. 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. American Axle & Manufacturing Holdings Inc. (AXL): Engages in the manufacture, engineering, design, and validation of driveline and drivetrain systems, and related components and chassis modules for automotive industry in the United States. Market cap at $672.06M, most recent closing price at $8.89. PEG at 0.32. MRQ net profit margin at 6.81% vs. 5.84% y/y. MRQ sales/assets at 0.3 vs. 0.298 y/y. MRQ assets/equity at -6.648 vs. -5.083 y/y.
4. Green Mountain Coffee Roasters Inc. (GMCR): Engages in the specialty coffee and coffee maker business. Market cap at $3.87B, most recent closing price at $24.82. PEG at 0.37. MRQ net profit margin at 10.51% vs. 10.09% y/y. MRQ sales/assets at 0.267 vs. 0.243 y/y. MRQ assets/equity at 1.54 vs. 2.553 y/y.
5. Boise Inc. (BZ): Engages in the manufacture and sale of paper and packaging products. Market cap at $716.49M, most recent closing price at $7.05. PEG at 0.5. MRQ net profit margin at 3.31% vs. 3.29% y/y. MRQ sales/assets at 0.287 vs. 0.274 y/y. MRQ assets/equity at 2.917 vs. 3.116 y/y.
6. BorgWarner Inc. (BWA): Engages in the manufacture and sale of engineered automotive systems and components primarily for power train applications worldwide. Market cap at $8.62B, most recent closing price at $74.75. PEG at 0.67. MRQ net profit margin at 8.26% vs. 7.19% y/y. MRQ sales/assets at 0.304 vs. 0.288 y/y. MRQ assets/equity at 2.363 vs. 2.604 y/y.
*Accounting data sourced from Google Finance, all other data sourced from Finviz.