To increase the likelihood to come across high-quality investments, one strategy is to look for reasonably-priced stocks of companies with good financials that are predicted to increase their earnings per share (EPS) significantly.
Thus, investors may want to consider the following stocks, as they trade near their historical median valuations and have a return on invested capital (aka ROIC) that exceeds the weighted average cost of capital (aka WACC), indicating profitable operations.
Furthermore, Wall Street analysts predict that these companies will beat the S&P 500 index in terms of a higher EPS growth rate for the next year. The benchmark for the U.S. market is predicted to increase its annual EPS by 58.7% for the full year of 2020 as compared to 2019, according to the estimates of analysts surveyed by ycharts.com.
Booking Holdings Inc
The first stock that meets the above criteria is Booking Holdings Inc (BKNG, Financial), a Norwalk, Connecticut-based online provider of travel and restaurant reservation services internationally.
The share price ($1,670.28 as of July 9) trades above the Peter Lynch earnings line but below the median historical valuation line.
The stock has a market capitalization of $68.37 billion and a 52-week price range of $1,107.29 to $2,094.
Booking Holdings Inc has a ROIC of 27.7%, which is 4.5 times the WACC of 6.2%.
Wall Street sell-side analysts estimate that Booking Holdings Inc’s annual EPS will grow by 337.6% to $70.41 in 2021, up from $16.09 in 2020. The stock holds an overweight recommendation rating on Wall Street.
Universal Display Corp
The second company that meets the above listed criteria is Universal Display Corp (OLED, Financial), an Ewing, New Jersey-based developer and marketer of semiconductors to manufacturers of display and solid-state lighting applications.
The share price ($161.10 as of July 9) trades above the Peter Lynch earnings line but below the median historical valuation line.
The stock has a market capitalization of $7.59 billion and a 52-week price range of $105.11 to $230.32.
Universal Display Corp has a ROIC of 31.13%, which is more than three times the WACC of 9.08%.
Wall Street sell-side analysts predict that Universal Display Corp’s annual EPS will grow by 59.1% to $4.20 in 2021, up from $2.64 in 2020. The stock holds an overweight recommendation rating on Wall Street.
The Joint Corp
The third company that makes the cut is The Joint Corp (JYNT, Financial), a Scottsdale, Arizona-based owner and operator of several chiropractic clinics in US.
The share price ($14.09 as of July 9) trades above the Peter Lynch earnings line but below the median historical valuation line.
The stock has a market capitalization of $196.45 million and a 52-week range of $7.67 to $21.80.
The Joint Corp has a ROIC of 8.79%, which exceeds the WACC of 6.95%.
Wall Street sell-side analysts forecast that The Joint Corp’s annual net earnings will grow to 25 cents per common share, up from 1 cent per common share forecasted for current full year. The stock has a buy recommendation rating on Wall Street.
Disclosure: I have no positions in any securities mentioned.
Read more here:
- A Trio of Stocks Growing Earnings Fast
- 3 Long-Term Payers Announce Dividends
- A Trio of High-Quality Stocks for the Value Investor
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