A Trio of High Earnings Return Stocks to Consider

Their yield is higher than the monthly spot rate for 20-year high-quality market corporate bonds

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Selecting stocks that more than double the earnings return that 20-year high-quality corporate bonds offer increases the likelihood to find value opportunities. Holders of these bonds, which represent corporate loans issued by triple-A, double-A and single-A-rated companies, receive a 3.45% monthly spot rate.

The following stocks offer earnings returns of more than 6.9% and have price-earnings ratios of less than 14.49.

Royal Caribbean Cruises

Shares of Royal Caribbean Cruises Ltd (RCL, Financial) closed at $109.70 on Monday for a market capitalization of $23 billion. The Miami, Florida-based cruise company grants an earnings return of 8.1% versus the industry median of 9.41% and has a price-earnings ratio of 12.27 versus the industry median of 19.04.

The stock has climbed 43% over the past five years through Feb. 10. Nonetheless, the share price is still below the Peter Lynch earnings line, suggesting it is not expensive.

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GuruFocus assigned a moderate rating of 4 out of 10 for the company's financial strength and a high rating of 8 out of 10 for its profitability.

The stock offers a forward dividend yield of 2.8% as of Monday.

Wall Street issued an overweight recommendation rating for shares of Royal Caribbean Cruises Ltd with an average target price of $144.24, which reflects a 31.5% upside from Monday’s closing price.

Lear Corp

Shares of Lear Corp (LEA, Financial) closed at $120.77 on Monday for a market capitalization of $7.3 billion.

The Southfield, Michigan-based designer, manufacturer and supplier of automotive seating and electrical distribution systems to original equipment manufacturers worldwide offers an earnings yield of 10.2% versus the industry median of 6.9%. The stock has a price-earnings ratio of 9.81 versus the industry median of 14.56.

The share price has increased 10.4% over the past five years through Feb. 10, but it is still trading cheaply according to the Peter Lynch chart.

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GuruFocus assigned a positive rating of 6 out of 10 for the company’s financial strength and a high rating of 8 out of 10 for its profitability.

The stock offers a forward dividend yield of 2.53% as of Monday.

Wall Street recommends an overweight rating for shares of Lear Corp and has set an average target price of $142.06, which reflects a 17.6% upside from Monday’s closing price.

ManpowerGroup

Shares of ManpowerGroup Inc (MAN, Financial) closed at $91.85 on Monday with a market capitalization of $5.42 billion.

The Milwaukee, Wisconsin-based provider of workforce solutions and services in the Americas and internationally grants an earnings return of 8.4% versus the industry median of 5.9% and a price-earnings ratio of 11.87 versus the industry median of 17.09.

The share price has increased by 19.7% over the past five years through Feb. 10, but it is still compelling based on the Peter Lynch chart.

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GuruFocus assigned the company a positive rating of 6 out of 10 for its financial strength and a very positive rating of 7 out of 10 for its profitability.

The stock grants a 2.35% forward dividend yield as of Monday.

Wall Street sell-side analysts recommend holding shares of ManpowerGroup Inc and have set an average target price of $98.45, reflecting a 7.2% upside from Monday’s closing price.

Disclosure: I have no positions in any securities mentioned.

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