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.
Do you think these companies have strong profitability? Use this list as a starting point for your own analysis. List Average 1-Year Return: -9%.
1. Dana Holding Corporation (DAN): Engages in the design, manufacture, and supply of products for vehicle manufacturers worldwide. Market cap at $2.1B, most recent closing price at $14.20. PEG = 0.68. MRQ net profit margin at 4.41% vs. 3.52% y/y. MRQ sales/assets at 0.363 vs. 0.352 y/y. MRQ assets/equity at 2.904 vs. 3.019 y/y.
2. Green Mountain Coffee Roasters Inc. (GMCR): Engages in the specialty coffee and coffee maker business. Market cap at $4.84B, most recent closing price at $31.09. PEG = 0.61. MRQ net profit margin at 8.43% vs. 7.86% y/y. MRQ sales/assets at 0.26 vs. 0.25 y/y. MRQ assets/equity at 1.507 vs. 1.582 y/y.
3. Graphic Packaging Holding Company (GPK): Provides packaging solutions in the United States, Canada, Central/South America, Europe, and the Asia-Pacific. Market cap at $2.28B, most recent closing price at $5.78. PEG = 0.48. MRQ net profit margin at 3.81% vs. 2.97% y/y. MRQ sales/assets at 0.253 vs. 0.232 y/y. MRQ assets/equity at 3.554 vs. 4.436 y/y.
4. Titan International Inc. (TWI): Titan International, Inc. and its subsidiaries manufacture wheels, tires, and assemblies for off-highway vehicles used in the agricultural, earthmoving/construction, and consumer markets in the United States. Market cap at $896.97M, most recent closing price at $21.21. PEG = 0.32. MRQ net profit margin at 9.59% vs. 6.09% y/y. MRQ sales/assets at 0.42 vs. 0.38 y/y. MRQ assets/equity at 2.302 vs. 2.726 y/y.
5. Quiksilver Inc. (ZQK): Designs, produces, and distributes branded apparel, footwear, accessories, and related products. Market cap at $575.78M, most recent closing price at $3.47. PEG = 0.99. MRQ net profit margin at 2.46% vs. 2.07% y/y. MRQ sales/assets at 0.297 vs. 0.291 y/y. MRQ assets/equity at 3.121 vs. 3.206 y/y.
*Accounting data sourced from Google Finance, all other data sourced from Finviz.