Six consumer discretionary stocks with encouraging return on equity

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By James Dennin for Kapitall. 

The Conference Board's Index of Consumer Confidence had a very strong month in July, sending it to a 7-year high according to  Bloomberg.

Higher gas prices, stabilizing food prices and of course falling unemployment (now at 6.1%) were behind the change.


The big question, however, is whether this will affect consumer spending, which has not improved despite most Americans claiming they're having an easier time finding jobs and securing higher wages. 

We decided to look for companies that would benefit the most if consumers  did start spending again, so naturally we focused on the consumer goods sector. 

Consumer goods fall on a scale from discretionary (non-essential) to durable. To narrow our screen, we focused on discretionary goods, reasoning that more discretionary goods will benefit most from higher levels of consumer confidence. 

Began our list using companies in the S&P 500 Discretionary Index , which is made up mostly of restaurant, hospitality, and other entertainment companies. When consumers tighten their belts, these are usually the first things to go. 

We then narrowed the screen by looking for encouraging returns on equity (ROE), the amount of money a stock makes for every dollar of equity. However, since ROE can be manipulated by borrowing money, and can vary from sector to sector, we used the Dupont Analysis to refine our screen further. 

Pioneered by the chemical giant of the same name, the Dupont Analysis breaks down ROE to see exactly where the higher figures are coming from. It does that by comparing a stock's profit margin and asset turnover to its peers, getting a more comprehensive picture of how the company generates those returns. 

We found 6 consumer discretionary stocks with encouraging Dupont Breakdowns. Do you think they will benefit from higher consumer confidence? Use the list below to begin your analysis and let us know what you think in the comments. 

Click on the interactive chart to view data over time. 

1. Comcast Corporation ( CMCSA , Earnings , Analysts , Financials ): Provides entertainment, information, and communications products and services in the United States and internationally. Market cap at $140.7B, most recent closing price at $54.39.  

MRQ net profit margin at 10.75% vs. 9.39% y/y.

MRQ sales/assets at 0.11 vs. 0.098 y/y.

MRQ assets/equity at 3.077 vs. 3.245 y/y.  

2. Walt Disney Co. ( DIS , Earnings , Analysts , Financials ): Operates as an entertainment company worldwide. Market cap at $149.34B, most recent closing price at $86.23.  

MRQ net profit margin at 16.46% vs. 14.34% y/y.

MRQ sales/assets at 0.141 vs. 0.13 y/y.

MRQ assets/equity at 1.84 vs. 1.933 y/y.  

3. Harley-Davidson, Inc. ( HOG , Earnings , Analysts , Financials ): Produces and sells heavyweight motorcycles, as well as offers motorcycle parts, accessories, and related services. Market cap at $13.96B, most recent closing price at $63.95.  

MRQ net profit margin at 15.41% vs. 14.26% y/y.

MRQ sales/assets at 0.177 vs. 0.168 y/y.

MRQ assets/equity at 3.079 vs. 3.513 y/y.

4. Tiffany & Co. ( TIF , Earnings , Analysts , Financials ): Engages in the design, manufacture, and retail of fine jewelry worldwide. Market cap at $12.82B, most recent closing price at $99.33.  

MRQ net profit margin at 12.41% vs. 9.33% y/y.

MRQ sales/assets at 0.21 vs. 0.192 y/y.

MRQ assets/equity at 1.696 vs. 1.76 y/y.  

5. Time Warner Cable Inc. ( TWC , Earnings , Analysts , Financials ): Operates as a cable operator in the United States. Market cap at $41.33B, most recent closing price at $148.36.  

MRQ net profit margin at 8.58% vs. 7.32% y/y.

MRQ sales/assets at 0.114 vs. 0.111 y/y.

MRQ assets/equity at 6.929 vs. 7.106 y/y.  

6. V.F. Corporation ( VFC , Earnings , Analysts , Financials ): Designs and manufactures, or sources from independent contractors various apparel and footwear products primarily in the United States and Europe. Market cap at $26.6B, most recent closing price at $61.81.  

MRQ net profit margin at 10.69% vs. 10.35% y/y.

MRQ sales/assets at 0.278 vs. 0.275 y/y.

MRQ assets/equity at 1.735 vs. 1.865 y/y.  

(List compiled by James Dennin. Monthly returns sourced from Zacks Investment Research, Dupont Analysis sourced from Yahoo! Finance. All other data sourced from Finviz.)

Kapitall Wire is a division of New Kapitall Holdings, LLC. Kapitall Generation, LLC is a wholly owned subsidiary of New Kapitall Holdings, LLC. Kapitall Wire offers free investing ideas, intended for educational information purposes only. It should not be construed as an offer to buy or sell securities, or any other product or service provided by New Kapitall Holdings, LLC, and its affiliate companies.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Stocks

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