featured highlights include AutoNation, Atkore, Valero Energy, Hologic and Ryder System

·7-min read

For Immediate Release

Chicago, IL – March 21, 2023 – Stocks in this week’s article are AutoNation, Inc. AN, Atkore Inc. ATKR, Valero Energy Corp. VLO, Hologic, Inc. HOLX and Ryder System, Inc. R.

Buy 5 High ROE Stocks as Markets Brace for Quarter-Point Rate Hike

The U.S. equity markets appeared to have regained their lost footing after the Swiss government brokered a deal for the forced takeover of the ailing Credit Suisse by UBS for 3 billion Swiss francs ($3.2 billion). With more than $5 trillion in assets, the combined bank is expected to provide the much-needed stability in the global banking system after the sudden Silicon Valley Bank collapse and Credit Suisse turmoil sent shockwaves through the markets, likely propelling the uptrend.

The markets also seemed to have factored in a quarter basis point (bp) hike in the interest rate by the Fed despite a better-than-expected inflation reading. The consumer price index for February came in at 0.4% on a monthly basis and 6% annual pace, slightly lower than January's inflation data of 0.5% and 6.4% respectively. The Fed had earlier raised the interest rates by 25 bps – much akin to the broader expectations – and kept the door ajar for future hikes as it indicated that the battle against inflation was far from over. It also expected economic growth to remain subdued in 2023.

As investors employ a wait-and-see approach in a classic example of "backing and filling" in the market, they can benefit from "cash cow" stocks that garner higher returns. However, identifying cash-rich stocks alone does not make for a solid investment proposition unless it is backed by attractive efficiency ratios like return on equity (ROE). A high ROE ensures that the company is reinvesting cash at a high rate of return. AutoNation, Inc., Atkore Inc., Valero Energy Corp., Hologic, Inc. and Ryder System, Inc. are some of the stocks with high ROE to profit from.

ROE: A Key Metric

ROE = Net Income/Shareholders' Equity

ROE helps investors distinguish profit-generating companies from profit burners and is useful in determining the financial health of a company. In other words, this financial metric enables investors to identify companies that diligently deploy cash for higher returns.

Moreover, ROE is often used to compare the profitability of a company with other firms in the industry — the higher, the better. It measures how well a company is multiplying its profits without investing new equity capital and portrays management's efficiency in rewarding shareholders with attractive risk-adjusted returns.

Here are five of the 15 stocks that qualified the screen:

AutoNation: Incorporated in Delaware in 1991, AutoNation is the largest automotive retailer in the United States. Apart from retailing new and used vehicles, the company offers vehicle maintenance and repair services, vehicle parts, extended service contracts, vehicle protection products and other aftermarket products. In addition, it arranges financing for vehicle purchases through third-party sources.

It delivered a trailing four-quarter earnings surprise of 4.8%, on average. It has a VGM Score of B. Currently, AutoNation carries a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank stocks here.

Atkore: Headquartered in Harvey, IL, Atkore offers conduits, cables, and installation accessories in the United States and internationally. With a network of manufacturing and distribution facilities worldwide, Atkore is a leading provider of electrical, safety and infrastructure solutions.

Atkore carries a Zacks Rank #2. It delivered a trailing four-quarter earnings surprise of 14.1%, on average. 

Valero Energy: San Antonio, TX-based Valero Energy is the largest independent refiner and marketer of petroleum products in the United States. The company was founded in 1980. Valero Energy has a refining capacity of 3.1 million barrels per day across 15 refineries throughout the United States, Canada and the United Kingdom.

The company has a long-term earnings growth expectation of 6% and delivered a trailing four-quarter earnings surprise of 19%, on average. Valero Energy sports a Zacks Rank #1.

Hologic: Headquartered in Bedford, MA, Hologic develops, manufactures and supplies diagnostics, medical imaging systems and surgical products that cater to the healthcare needs of women. The company is currently focusing on expanding its business across the patient continuum of care and has launched software products based on its investments in artificial intelligence.

The company has a long-term earnings growth expectation of 15.2% and delivered a trailing four-quarter earnings surprise of 30.6%, on average. Hologic carries a Zacks Rank #2.

Ryder: Florida-based Ryder is recognized as one of the world's largest providers of integrated logistics and transportation solutions. Ryder's customers range from small businesses to large international enterprises. They are from a wide variety of industries, the most significant of which are automotive, electronics, transportation, grocery, lumber and wood products, food service and home furnishing. 

Ryder delivered a trailing four-quarter earnings surprise of 21.8%, on average. It has a VGM Score of A. It sports a Zacks Rank #1.

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Ryder System, Inc. (R) : Free Stock Analysis Report

Valero Energy Corporation (VLO) : Free Stock Analysis Report

AutoNation, Inc. (AN) : Free Stock Analysis Report

Hologic, Inc. (HOLX) : Free Stock Analysis Report

Atkore Inc. (ATKR) : Free Stock Analysis Report

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