When a company’s return on equity (ROE) ratio is higher than the median of its industry, it indicates the company has been more efficient than peers in making the most of its assets.
Thus, investors may want to consider the following stocks, as they are topping most of their competitors in terms of higher ROE.
PepsiCo Inc
The first stock to consider is PepsiCo Inc (PEP, Financial), a Purchase, New York-based manufacturer of soft drinks and snacks.
PepsiCo Inc exhibits a ROE of 49.77%, which tops the industry median of 9.09%.
The share price ($137.69 as of Thursday) jumped 8.3% over the past year for a market capitalization of $190.65 billion and a 52-week range of $101.42 to $147.20.
A price book ratio of 15.35, which is far above the industry median of 1.89, tells that the stock is not at its cheapest, but the dividend yield of 2.83% beats the S&P 500’s yield of 1.84% (as of July 30).
GuruFocus has assigned a financial strength rating of 4 out of 10 and a profitability rating of 7 out of 10 to the company.
The stock holds an overweight recommendation rating with an average target price of $146.44 per share on Wall Street.
Clorox Co
The second stock to be under consideration is Clorox Co (CLX, Financial), an Oakland, California-based manufacturer and marketer of household, personal and professional products.
Clorox Co has a ROE of 138.54%, which is more than 25 times the industry median of 5.51%.
The share price ($231.26 as of Thursday) has risen 48.11% in the past year, determining a market capitalization of $29.12 billion and a 52-week range of $144.12 to $233.
The stock has a price-book ratio of 41.92, which is far above the industry median of 1.4, indicating that the share price is not cheap. Clorox Co’s dividend yield of 1.85% (at close on Thursday) barely exceeds the S&P 500.
GuruFocus has assigned a financial strength rating of 5 out of 10 and a profitability rating of 8 out of 10 to the company.
Wall Street sell-side analysts issued a hold recommendation rating and have established an average target price of $206.54 per share for the company.
The Hershey Co
The third stock investors should consider is The Hershey Co (HSY, Financial), a Hershey, Pennsylvania-based manufacturer and seller of confectionery products in North America and internationally.
The Hershey Co has a ROE of 62.41%, which tops the industry median of 5.51% tremendously.
The share price ($145.29 as of Thursday) has fallen by 4.2% over the past year for a market capitalization of $30.22 billion and a 52-week range of $109.88 to $162.20.
The price-book ratio of 17.31, which is much higher than the industry median of 1.4, indicates that the share price doesn’t trade cheaply at the moment. Hershey Co’s dividend yield of 2.14% outperforms the S&P 500.
GuruFocus has assigned a score of 5 out of 10 to the financial strength rating and a score of 8 out of 10 to the profitability rating of the company.
The stock has a hold recommendation rating with an average target price of $149.71 per share on Wall Street.
Disclosure: I have no positions in any security mentioned in this article.
Read more here:
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- A Trio of Picks Trading Below the Graham Number
- 3 Stocks Trading at a Discount
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