These 3 High-ROE Stocks Are More Profitable Than Their Peers

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Includes: CTCM, MA, MMM
by: Kapitall

Summary

Fundamental analysis is all about figuring out a company's value; Technical analysis, on the other hand, is all about the market and where it's going.

ROE is a profitability measurement that expresses a company's profits as a percentage of shareholder equity.

We screened for high ROE stocks that also have a return on assets greater than the industry average and a return on investment greater than the industry average.

We narrowed down our group to stocks that are more profitable than their peers on a TTM basis.

There's a lot of analysis involved with investing, and there are two approaches when it comes to evaluating stocks: fundamental and technical. Fundamental analysis is all about figuring out a company's value, and it relies upon assorted factors-pulled primarily from the company's finances-to arrive to a conclusion about a stock. For a better picture of what factors are frequently used in fundamental analysis, check out this Finviz tab.

Technical analysis, on the other hand, is all about the market and where it's going. Essentially, technical analysts study the market in order to identify patterns that will help them best predict the future. Volatility, performance, 52-week highs, and other price-related metrics are what matter most in this approach to investing.

We decided to run a screen for those more interested in fundamental analysis. To begin, we screened for stocks with a return on equity greater than the industry average on a trailing twelve month basis. ROE is a profitability measurement that expresses a company's profits as a percentage of shareholder equity.

Sticking with our returns theme, we then screened for high ROE stocks that also have a return on assets greater than the industry average on a TTM basis and a return on investment greater than the industry average on a TTM basis. ROA is a metric that analyzes a company's ability to generate earnings from its assets while ROI calculates the profitability of an investment by dividing the benefit by its cost.

For our final screen, we narrowed down our group to stocks that are more profitable than their peers on a TTM basis. This means that their gross margin, operating margin, and pretax margin are all higher than their respective industry averages. And when companies have above-average margins, it shows that they're able to operate more efficiently than most of their fellow firms.

1. CTC Media, Inc (CTCM, Kapitall snapshot): Operates as an independent broadcasting company in Russia. Market cap at $1.49B, most recent closing price at $9.57.

TTM Return on Equity at 21.25% vs. an industry average at 3.53%.

TTM Return on Assets at 16.04% vs. an industry average at 5.93%.

TTM Return on Investments at 20.77% vs. an industry average at 7.85%.

TTM gross margin at 54.17% vs. industry average at 40.65%. TTM operating margin at 29.04% vs. industry average at 20.22%. TTM pretax margin at 26.16% vs. industry average at 16.11%.

2. MasterCard Incorporated (MA, Kapitall snapshot): Provides transaction processing and related services to customers principally in support of their credit, deposit access, electronic cash and automated teller machine payment card programs, and travelers' cheque programs. Market cap at $88.35B, most recent closing price at $76.30.

TTM Return on Equity at 47.23% vs. an industry average at 41.09%.

TTM Return on Assets at 23.12% vs. an industry average at 12.99%.

TTM Return on Investments at 42.01% vs. an industry average at 23.79%.

TTM gross margin at 58.66% vs. industry average at 49.76%. TTM operating margin at 55.42% vs. industry average at 29.57%. TTM pretax margin at 54.16% vs. industry average at 29.32%.

3. 3M Company (MMM, Kapitall snapshot): Operates as a diversified technology company worldwide. Market cap at $91.88B, most recent closing price at $141.80.

TTM Return on Equity at 27.43% vs. an industry average at 14.54%.

TTM Return on Assets at 14.28% vs. an industry average at 5.49%.

TTM Return on Investments at 20.02% vs. an industry average at 7.51%.

TTM gross margin at 52.52% vs. industry average at 47.43%. TTM operating margin at 21.91% vs. industry average at 14.99%. TTM pretax margin at 21.56% vs. industry average at 12.65%.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Business relationship disclosure: Kapitall is a team of analysts. This article was written by Mary-Lynn Cesar, one of our writers. We did not receive compensation for this article (other than from Seeking Alpha), and we have no business relationship with any company whose stock is mentioned in this article.