When a company’s return on equity (ROE) ratio is higher than the average of its competitors, the investor usually deduces that the managers have been more efficient than most of their colleagues in using the assets of their company to generate profits. This aspect of the company’s profitability is highly welcomed by traders, providing a good catalyst to higher share prices.
Thus, investors may be interested in the following stocks, as they are beating most of their competitors in terms of a higher ROE ratio.
PennyMac Financial Services Inc
The first stock to have a look at is PennyMac Financial Services Inc (PFSI, Financial), a Westlake Village, California-based provider of mortgage banking and investment management services to U.S. clients.
PennyMac Financial Services Inc has a ROE ratio of 33.26%, which beats the industry median of 8.38% significantly, ranking higher than 1,366 competitors out of a total of 1,384 companies operating in the banks industry.
The share price increased 72.8% in the past year up to $40.44 at close on Tuesday for a market capitalization of $3.2 billion and a 52-week range of $13.14 to $43.14.
Though higher than the industry median of 0.74, a price-book ratio of 1.35 indicates that PennyMac Financial Services Inc may still be affordable.
GuruFocus has assigned a financial strength rating of 2 out of 10 and a profitability rating of 8 out of 10 to the company.
The stock holds a buy recommendation rating with an average target price of $45.71 per share on Wall Street.
SVB Financial Group
The second stock investors should consider is SVB Financial Group (SIVB, Financial), a Santa Clara, California-based regional bank.
SVB Financial Group exhibits ROE of 16.18%, which is nearly twice the industry median of 8.38% and beats 1,262 competitors out of a total of 1,384 companies operating in the banks industry.
The share price has fallen 4.4% in the past year down to $208.11 at close on Tuesday for a market capitalization of $10.66 billion and a 52-week range of $127.39 to $270.95.
The stock has a price-book ratio of 1.6 which, which is higher than the industry median of 0.74.
GuruFocus has assigned a financial strength rating of 3 out of 10 and a profitability rating of 5 out of 10 to the company.
The stock holds an overweight recommendation rating with an average target price of $233.03 per share on Wall Street.
BorgWarner Inc
The third stock to have a look at is BorgWarner Inc (BWA, Financial), an Auburn Hills, Michigan-based provider of several technical solutions for electric, hybrid and petrol vehicles worldwide.
BorgWarner Inc has a ROE of 15.85%, which outperforms the industry median of 5.41% significantly, as it is ranked higher than 957 out of a total of 1,099 companies operating in the vehicles and parts industry.
The share price has decreased by 10.2% in the past year to close at $36.28 on Tuesday for a market capitalization of $7.48 billion and a 52-week range of $17 to $46.60.
The price-book ratio of 1.59 is higher than the industry median of 1.08.
GuruFocus has assigned a score of 6 out of 10 to the financial strength rating and a score of 8 out of 10 to the profitability rating of the company.
Wall Street sell-side analysts issued an overweight recommendation rating and have established an average target price of $37.80 per share.
Disclosure: I have no positions in any security mentioned in this article.
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