One of the quickest ways to gauge whether a company is creating assets or gobbling up investor’s cash is to look at their Return On Equity (ROE). The fast moving ROE Profit Track screening strategy from Zacks.com has generated an impressive return of +21.4% in 2005. In 2006, it continued to outperform the S&P 500, returning 27.0% versus the S&P 500 rise of 16.7%. Four stocks meeting this screen’s exclusive criteria are Accenture (NYSE: ACN), Barnes & Noble, Inc. (NYSE: BKS), Gap, Inc. (NYSE: GPS) and Herman Miller, Inc. (NASDAQ: MLHR). View the entire list of stocks for the ROE Profit Track at http://at.zacks.com/?id=1853
Here are details about four companies currently identified by the ROE Profit Track:
Accenture (NYSE: ACN) sports a ROE of almost 67.7%, which trounces this screen’s requirement of greater than or equal to 10% while proving that the consulting firm is creating assets. In addition, its price/sales ratio of 0.97 suggests that Accenture is also a good value. The company got on the Street’s good side last month with a strong fiscal first quarter performance, which included a positive earnings per share surprise and the highest quarterly net revenues in its history. ACN also raised its profit outlook for the full fiscal year. More recently, Accenture completed the acquisition of privately-held defense consulting firm Gestalt, LLC.
Barnes & Noble, Inc. (NYSE: BKS) has a ROE of approximately 12.7% and a price/sales ratio of 0.39. These two points, along with its Zacks #1 Rank, puts this bookseller on the ROE Profit Track. The company appears to be creating assets, and putting itself in a good position for stock price appreciation down the road. For its fiscal third quarter, Barnes & Noble announced a positive earnings per share surprise, a 5.7% rise in total sales and a 2.6% gain in same-store sales. The company also raised its full-year EPS guidance.
Gap, Inc.’s (NYSE: GPS) turnaround strategy recently received some praise from a brokerage analyst. This is worthy of note since management’s ability to improve profit potential is an important part of the ROE Profit Track. GPS makes the grade with a ROE of 16.4% and a price/sales ratio of 0.95. The retailing giant finished off 2007 with some fresh 52-week highs. In addition, the company also reported flat same-store sales for November early last month, which beat Wall Street expectations. This Zacks #1 Rank company has watched earnings estimates for the year ending January 2008 improve by 7.3% over the past month.
Herman Miller, Inc. (NASDAQ: MLHR) recently announced that fiscal third-quarter earnings per share should grow between 10% and 24% over the previous year, while sales should range between $475 million and $500 million. The office furniture maker attributed this outlook to a strong ending backlog. This guidance came as MLHR announced solid fiscal second-quarter numbers, such as earnings per share above the consensus and a year-over-year sales gain. In addition to this performance, Herman Miller has also displayed the ability to generate assets that should drive its price in the future. It qualifies for this profit track with a ROE at 91.3%, along with a price/sales ratio of 1 and a Zacks #1 Rank. At the same time of its quarterly report, Herman Miller also announced a definitive agreement to acquire healthcare furnishings company Brandrud Furniture.
Discover all the current stocks currently on the ROE Profit Track at: http://at.zacks.com/?id=1854
About Profit Tracks
What is a "Profit Track"? Each Profit Track is a successful stock picking strategy with proven results through the Bear Market of 2001-2002 and the Bull run started in 2003. On Zacks.com we have created these nine unique screens to offer investors great strategies to potentially outperform the market in the years ahead. In 2006, the Low Price Stocks strategy was the top performing Profit Track with a return of +56.5% followed by the Discounted Fundamental screen with a +34% return. To see all nine strategies along with philosophy, past performance and current stocks, go to http://at.zacks.com/?id=1838.
All the Profit Track strategies were created and backtested using the Research Wizard software from Zacks Investment Research. If you like this screening strategy, but want to narrow down the list of stocks and even improve the performance, then you should start a free trial to this powerful stock picking tool. Learn more about the Research Wizard free trial offer and our new special report “Top 10 Stock Screening Strategies” at http://at.zacks.com/?id=2156
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The performance of the Zacks Rank portfolios shown above for annual and year-to-date periods are the linked monthly total returns (price changes + dividends) of equal weighted hypothetical portfolios, consisting of those stocks with the indicated Zacks Rank, assuming monthly rebalancing and zero transaction costs. These are not the returns of actual portfolios. The hypothetical portfolios were created at the beginning of each month from Jan 1988 forward based on the values of the Zacks Rank available to Zacks' clients before the beginning of each month. The portfolios created monthly from 1988 through September 2006 exclude ADRS and are comprised of stocks that have the indicated Zacks Rank and were covered by at least two analysts at the time of the stocks inclusion in the portfolio. Starting in October 2006 and going forward, the portfolios are comprised of all stocks with the indicated Zacks Rank and do not exclude ADRs, which is more reflective of the list of stocks that customers will find on the Zacks web sites. 2007 returns are for the period of Jan 1 – Jun 30, 2007. These performance numbers have been audited from 1995 through 2003 by Autschuler Melovan, a division of American Express Financial.
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