Zacks.com featured highlights: Nutrisystem, American Woodmark, Five Below, Best Buy and PetMed Express


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For Immediate Release

Chicago, IL - June 19, 2017 - Stocks in this week's article include  Nutrisystem Inc. (NASDAQ: NTRI - Free Report ), American Woodmark Corporation (NASDAQ: AMWD - Free Report ), Five Below Inc. (NASDAQ: FIVE - Free Report ), Best Buy Co. Inc. (NYSE: BBY - Free Report ) and PetMed Express Inc. (NASDAQ: PETS - Free Report ).

Screen of the Week of Zacks Investment Research:

Pick 5 Top-Ranked Profitable Stocks Using DuPont Analysis

Return on equity (ROE) is one of the top ratios that investors use to screen profitable stocks. However, delving into the basic ROE and analyzing it at a deeper level, with the help of DuPont analysis, could lead to better returns.

It is an analytical method, which critically examines three major elements - operating management, management of assets and the capital structure - related to the financial condition of a company. It's basically taking ROE apart to examine how it works. Although it can be presented in several ways, the most popular one is shown below:

ROE = Net Income/Equity

Net Income / Equity = (Net Income / Sales) * (Sales / Assets) * (Assets / Equity)

ROE = Profit Margin * Asset Turnover Ratio * Equity Multiplier

Why Use DuPont?

The importance of ROE can't be denied but still it doesn't always provide a complete picture.The DuPont analysis, on the other hand, allows investors to assess the elements that play a dominant role in any change in ROE. It can help investors to segregate companies having higher margins from those having high turnover. For example, high end fashion brands generally survive on high margin as compared with retail goods, which rely on higher turnover.

In fact, it also sheds light on a company's leverage status, which can go a long way in selecting stocks poised for gains. A lofty ROE could be due to the overuse of debt. Thus, ROE of a company can be misleading if it has a high debt burden.

So, an investor confined solely to an ROE perspective will be at a loss if he or she has to judge between two stocks of equal ratio. DuPont analysis comes to the rescue and finds out the better stock. Thus, a company with a healthy mix of all the three metrics - profit margin, asset turnover ratio and equity multiplier - will be the most alluring.

DuPont analysis is not difficult, as the required numbers are available in a company's income statement and balance sheet.

However, looking at the financial statements of each and every company separately can be a tedious task. Screening tools like Zacks Research Wizard can easily shortlist the stocks that look impressive based on DuPont analysis.

Screening Parameters

Profit Margin more than or equal to 3: As the name suggests, it is a measure of how profitably the business is running. Generally, it is the key contributor to ROE.

Asset Turnover Ratio more than or equal to 2: It allows an investor to assess management's efficiency in using assets to drive sales.

Equity Multiplier between 1 and 3: It's an indication of how much debt the company uses to finance its assets.

Zacks Rank less than or equal to 2: Stocks having a Zacks Rank #1 (Strong Buy) or 2 (Buy) generally perform better than their peers in all types of market environment.

Current Price more than $5: This screens out the low priced stocks. However, when looking for lower priced stocks, this criterion can be removed.

Here are five of 12 stocks that made it through the screen:

Nutrisystem Inc. (NASDAQ: NTRI - Free Report ): This Zacks Rank #1 company is a provider of weight management products and services. Its Zacks Industry Rank is in the top 13%. You can see the complete list of today's Zacks #1 Rank stocks here .

American Woodmark Corporation (NASDAQ: AMWD - Free Report ): The Zacks Rank #2 company manufactures and distributes kitchen cabinets and vanities for remodeling. Its Zacks Industry Rank is in the top 31%.

Five Below Inc. (NASDAQ: FIVE - Free Report ): It is a specialty value retailer offering merchandise for teen and pre-teen customers in the U.S. Its Zacks Industry Rank is in the top 31%. The stock has a Zacks Rank #2.

Best Buy Co. Inc. (NYSE: BBY - Free Report ): The company is a leading retailer. The stock carries a Zacks Rank #1 and has a VGM score of A. Its Zacks Industry Rank is in the top 1%.

PetMed Express Inc. (NASDAQ: PETS - Free Report ): This is the largest pet pharmacy, delivering prescription and non-prescription pet medications. It has a Zacks Rank #1 and the Zacks Industry Rank is in the top 15%.

You can get the rest of the stocks on this list by signing up now for your 2-week free trial to the Research Wizard and start using this screen in your own trading. Further, you can also create your own strategies and test them first before taking the investment plunge.

The Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.

Click here to sign up for a free trial to the Research Wizard today .

Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.

Disclosure: Performance information for Zacks' portfolios and strategies are available at: https://www.zacks.com/performance .

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Sign up now for your free trial today and start picking better stocks immediately. And with the backtesting feature, you can test your ideas to see how you can improve your trading in both up markets and down markets. Don't wait for the market to get better before you decide to do better. Start learning how to be a better trader today: https://at.zacks.com/?id=111

Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.

About Screen of the Week

Zacks.com created the first and best screening system on the web earning the distinction as the "#1 site for screening stocks" by Money Magazine. But powerful screening tools is just the start. That is why Zacks created the Screen of the Week to highlight profitable stock picking strategies that investors can actively use. Each week, Zacks Profit from the Pros free email newsletter shares a new screening strategy. Learn more about it here https://at.zacks.com/?id=112

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Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978. The later formation of the Zacks Rank, a proprietary stock picking system; continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Click here for your free subscription to Profit from the Pros .

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.


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NutriSystem Inc (NTRI): Free Stock Analysis Report

American Woodmark Corporation (AMWD): Free Stock Analysis Report

Five Below, Inc. (FIVE): Free Stock Analysis Report

Best Buy Co., Inc. (BBY): Free Stock Analysis Report

PetMed Express, Inc. (PETS): Free Stock Analysis Report

To read this article on Zacks.com click here.

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



This article appears in: Investing , Stocks
Referenced Symbols: NTRI , AMWD , FIVE , BBY , PETS


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