Shares of Automatic Data Processing Inc. (ADP, Financial), Smith & Nephew PLC (SNN, Financial) and Nexstar Media Group Inc. (NXST, Financial) have performed strongly over the past several years, topping the overall U.S. stock market in terms of stock price appreciation.
The S&P 500 index, which is used as a benchmark for the U.S. market, rose 19.2% in the past 12 months, 24% in the past two years and 40.3% in the past three years through Monday, Feb. 3.
An essential catalyst to the share prices of these stocks over the observed period has been their profitability, which GuruFocus has rated with high scores. Investors may see their share prices keep on rising, should the underlying businesses continue to increase their profitability in the years ahead.
Wall Street analysts have also released positive recommendation ratings of overweight to buy for these stocks.
Automatic Data
Shares of Automatic Data Processing Inc have gained 19.7% over the last 52 weeks, 56.1% over the past two years and 78% over the past three years through Feb. 3, outperforming the S&P 500 by 0.5%, 14.3% and 18.1%, respectively.
The Roseland, New Jersey-based provider of cloud-based human capital management solutions has also paid quarterly dividends over the observed periods. The most recent quarterly dividend of 91 cents per common share was paid on April 1. Based on a $173.94 share price at close on Monday, the quarterly dividend generates a 1.87% trailing 12-month dividend yield and a 2.12% forward dividend yield. The S&P 500 yields 1.79%.
GuruFocus assigned a moderate rating of 5 out of 10 for the company's financial strength and a high rating of 9 out of 10 for its profitability.
Automatic Data Processing has an operating margin of 21.74% versus the industry median of 5.22% and a net margin of 16.97% versus the industry median of 3.29%. Also, the company has a return on equity of 47.12% versus the industry median of 8.3%.
The stock has a market capitalization of $75.1 billion, a price-earnings ratio of 30.73, a price-sales ratio of 5.22 and a price-book ratio of 14.05. These ratios, together with the below Peter Lynch chart, indicate that the stock is not cheap.
Wall Street sell-side analysts issued an overweight recommendation rating for this stock with an average target price of $185.53 per share.
Smith & Nephew
Shares of Smith & Nephew plc have gained 24.6% over the last 12 months, 38.3% over the past two years and 58.4% over the past three years through Feb. 3, outperforming the S&P 500 by 5.4%, 14.3% and 18.1%, respectively.
The British developer, manufacturer and seller of medical devices has also paid semi-annual dividends over the observed years. In 2019, the company paid a semi-annual dividend of 44 cents per common share on May 8 and of 28.8 cents per common share on Oct. 30. Based on Monday’s closing share price of $47.83, the dividend generates a 1.52% trailing 12-month and forward yield.
GuruFocus rated the company's financial strength with a positive score of 6 out of 10 and its profitability with a high score of 8 out of 10.
Smith & Nephew plc has an operating margin of 21.28% versus the industry median of 1.49% and a net margin of 14.1% versus the industry median of negative 0.57%. Further, the company has a return on equity of 14.7% versus the industry median of 0.43%.
The stock has a market capitalization of $20.93 billion, a price-earnings ratio of 29.11, a price-sales ratio of 4.15 and a price-book ratio of 4.11. The below Peter Lynch chart also suggests that the current share price is not cheap.
Wall Street sell-side analysts recommend an overweight rating for this stock with an average target price of $50.54 per share.
Nexstar Media Group
Shares of Nexstar Media Group Inc have climbed 49% over the last 52 weeks, 75% over the past two years and 84% over the past three years through Feb. 3, outperforming the S&P 500 by 29.8%, 51% and 43.7%, respectively.
The Irving, Texas-based television broadcasting and digital media company has also paid quarterly dividends over the period in question. The next quarterly payment of 56 cents per common share, which will be made on Feb. 28 to shareholders of record as of Feb. 14, represents a 24.4% hike from the previous payment of 45 cents per common share sent out to shareholders on Nov. 22. Based on the share price of $124.25 at close on Monday, the dividend produces a trailing 12-month yield of 1.47% and a forward yield of 1.85%. The S&P 500 returns 1.79%.
GuruFocus assigned a low rating of 3 out of 10 for the company's financial strength but a very high rating of 8 out of 10 for its profitability.
Nexstar Media Group has an operating margin of 21.45% versus the industry median of 5.16% and a net margin of 9.87% versus the industry median of 2.22%. Also, the company has a return on equity of 14.46% versus the industry median of 3.46%.
The stock has a market capitalization of $5.73 billion, a price-earnings ratio of 21.95, a price-sales ratio of 2.15 and a price-book ratio of 2.97. Based on these ratios, the stock may look a bit overvalued, but the Peter Lynch chart indicates that it trades close to its fair value.
Wall Street sell-side analysts recommend buying shares of this stock and have established an average target price of $146 per share.
Disclosure: I have no positions in any securities mentioned.
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