There is a certain amount of respect given to those people and businesses that get back on their feet after receiving a blow. In the financial industry, many of the companies have had to rebuild to regain consumer confidence. To find finance stocks that have stamina and endurance, we ran a screen that focused on profitability and potential for growth. When the two are in sync, a company is well positioned to go to the next level. For your review, we developed a short list of financial stocks that have a solid track record of profitability and have an EPS growth rate above 25% in the coming year.
Return on Equity (ROE) is one way to identify great potential names relative to profitability. This ratio illustrates the percentage return on shareholder equity. As well, this metric segments the company into operational efficiency, asset use efficiency, and financial leverage. Why does this matter? Simply put, it allows investors to get a real picture of how the company is generating these returns and helps identify parts of the company that may be underperforming.
Return on Assets (ROA) illustrates how much a company is generating in earnings from its assets alone. This metric gives investors a picture of how profitable the company is relative to the assets in current possession. As well, it lets investors see how efficient and effective management is at generating earnings from the company's assets. While most management teams can probably make money by throwing money at an issue very few can make very large profits with little investment.
EPS growth (earnings per share growth) illustrates the growth of earnings per share over time. The one-year expected EPS growth rate is an annual growth estimate, where the growth projections are made by analysts, the company or other credible sources.
We first looked for financial stocks. Then we looked for businesses that have been able to maintain a sound level of profitability for shareholders (ROE [TTM]>30%)(ROA [TTM]>10%). We then looked for companies that have expected earnings per share growth of more than 25 percent for next year(1-year projected EPS Growth Rate>25%). We did not screen out any market caps.
Do you think these stocks have higher to rise? Use our list to help with your own analysis.
1) Epoch Investment Partners, Inc. (EPHC)
|Return on Equity||38.01%|
|Return on Assets||34.53%|
|1-Year Projected Earnings Per Share Growth Rate||26.53%|
Epoch Investment Partners, Inc. is a publicly owned investment manager. The firm primarily provides its services to pooled investment vehicles, typically mutual funds. It also caters to high net worth individuals, investment companies, corporations, public funds, foundations, state or municipal government entities, endowments, pension and profit sharing plans, and charitable organizations. The firm manages separate client-focused equity portfolios. It also manages equity mutual funds and variable annuity funds through sub-advisory relationships. The firm invests in the public equity markets across the globe.
It invests in value stocks of companies across all capitalizations. The firm benchmarks the performance of its portfolios invested in the United States against the Russell and S&P 500 indices and the performance of its international small cap portfolio against the S&P EPAC Small Cap Index and the global absolute return portfolio against the MSCI World ex USA Small Cap and Barclays Capital U.S. Aggregate indices. It conducts in-house research to make its investments. Epoch Investment Partners, Inc. was founded in April 2004 and is based in New York City with an additional office in Sherman Oaks, California.
2) Nationstar Mortgage Holdings Inc. (NSM)
|Return on Equity||46.82%|
|Return on Assets||12.80%|
|1-Year Projected Earnings Per Share Growth Rate||32.40%|
Nationstar Mortgage Holdings Inc., through its subsidiary, Nationstar Mortgage LLC, engages in the servicing of residential mortgage loans in the United States. It is also involved in the origination and sale or securitization of single-family conforming mortgage loans to government-sponsored entities or other third party investors in the secondary market. The company services a range of mortgage loans, including prime and non-prime loans, traditional and reverse mortgage loans, and GSE and government agency-insured loans, as well as private-label loans issued by non-government affiliated institutions.
As of December 31, 2011, it serviced approximately 645,000 residential mortgage loans to national and regional banks, government organizations, securitization trusts, private investment funds, and other owners of residential mortgage loans and securities. In addition, the company originates conventional agency and government residential mortgage loans. Further, it offers various ancillary services, including providing services for delinquent loans; managing loans in the foreclosure/real estate owned process; and providing title insurance agency, loan settlement, and valuation services on newly originated and re-originated loans. The company was founded in 1994 and is based in Lewisville, Texas. Nationstar Mortgage Holdings Inc. operates as a subsidiary of FIF HE Holdings LLC.
3) Diamond Hill Investment Group Inc. (DHIL)
|Return on Equity||50.93%|
|Return on Assets||36.46%|
|1-Year Projected Earnings Per Share Growth Rate||43.50%|
Diamond Hill Investment Group, Inc., through its subsidiaries, sponsors, markets, and provides investment advisory and related services in the United States. The company also offers fund administration services, including portfolio and regulatory compliance, treasury and financial oversight, underwriting, and general oversight of other back-office services providers, such as the custodian, fund accountant, and transfer agent. It manages portfolio strategies, such as small cap, small-mid cap, large cap, select, long-short, research opportunities, financial long-short, and strategic income strategies.
The company offers its services to mutual funds, separate accounts, and private investment funds, as well as to institutional and individual investors. Diamond Hill Investment Group, Inc. markets its products through financial intermediaries, including independent registered investment advisors, brokers, financial planners, investment consultants, and third party marketing firms; and markets its separately managed accounts directly to institutional plan sponsors. The company was founded in 1990 and is based in Columbus, Ohio.
*Company profiles were sourced from Google Finance and Yahoo Finance. Financial data was sourced from Finviz on August 24, 2012.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.