Value investors may want to consider the following three stocks, as they represent equities in companies with high profitability and robust financial conditions. Each of them has GuruFocus profitability and financial strength ratings of at least 7 out of 10.
Furthermore, Wall Street sell-side analysts have recommended positive ratings for these stocks.
Microsoft Corp
The first stock that makes the cut is Microsoft Corp (MSFT, Financial), a Redmond, Washington-based developer, manufacturer, licensor and seller of computer software, personal computers and consumer electronics.
GuruFocus rated its financial strength 7 out of 10, driven by a Piotroski F-Score of 8 out of 9 and an Altman Z-Score of 7.12. These indicators tell that the financial conditions of the company are robust.
Furthermore, Microsoft has a return on invested capital of 28.10%, which exceeds the weighted average cost of capital of 5.66%. This indicates the company's investments are returning more than what it costs to raise the necessary financial resources.
GuruFocus rated its profitability 9 out of 10, driven by a return on capital (ROC) ratio of 121.68%. The company's ROC ratio ranks higher than 82% of the 2,250 companies that are operating in the software industry. The industry has a median of 16.34%.
The share price ($210.52 as of Dec. 10) has climbed 37.38% over the past year for a market capitalization of $1.59 trillion, a price-earnings ratio of 34.01 (versus the industry median of 30.98) and a price-book ratio of 12.91 (versus the industry median of 3.49).
The price-sales ratio is 10.97 (versus the industry median of 2.81) and the 52-week range is $132.52 to $232.86.
On Wall Street, the stock has 14 strong buys, 13 buys, six holds and one sell recommendation rating for an average target price of $239.71 per share.
NVIDIA Corp
The second stock that qualifies is NVIDIA Corp (NVDA, Financial), a Santa Clara, California-based producer of graphics processing units and system on chip units for the consumer electronics, computer hardware, semiconductors and video game industries.
GuruFocus rated its financial strength 7 out of 10, driven by an interest coverage ratio of 26.38 as of the most recent quarter. It ranks higher than 57% of the 562 companies that operate in the semiconductors industry. Also, the Piotroski F-score is 6 out of 9 and the Altman Z-Score is 19.14. These ratios indicate that the business is supported by stable financial conditions.
The ROIC of 46.21% is surpassing the WACC of 9.21%, suggesting the investment is generating a higher return than the cost the company is bearing to raise the capital needed for that investment.
GuruFocus rated NVIDIA's profitability 9 out of 10, driven by an ROC ratio of 131.58%. It ranks 95% higher than 830 companies that are operating in the semiconductors industry. The industry has a median of 10.36%.
The share price ($518.89 as of Dec. 10) has risen 131.57% over the past year for a market capitalization of $321.19 billion, a price-earnings ratio of 84.92 (versus the industry median of 30.17) and a price-book ratio of 21.32 (versus the industry median of 2.55).
The price-sales ratio is 21.96 (versus the industry median of 2.41) and the 52-week range is $180.68 to $589.07.
On Wall Street, the stock has seven strong buys, 14 buys, 15 holds, one underperform recommendation rating and one sell recommendation rating for an average target price of $589.60 per share.
Copart Inc
The third stock that qualifies is Copart Inc (CPRT, Financial), a Dallas, Texas-based online provider of auctions and vehicle remarketing services to its clients in North America and internationally.
GuruFocus rated its financial strength 8 out of 10, driven by an equity-to-asset ratio of 0.73 (versus the industry median of 0.48) and a debt-to-Ebitda ratio of 0.54 (versus the industry median of 2.23). Furthermore, the Piotroski F-score is 6 out of 9 and the Altman Z-Score is 18.18. These indicators suggest the company has a stable financial situation.
The ROIC of 26.27% surpasses the WACC of 6.96%, which indicates the investment is currently returning a higher profit than what the investment is costing.
GuruFocus rated Copart's profitability 9 out of 10, driven by an operating margin of 41.93% (versus the industry median of 4.14%), which ranks higher than 97% of the 1,014 companies that are operating in the business services industry.
The share price ($114.75 as of Dec. 10) has increased 29.69% over the past year for a market capitalization of $27.10 billion, a price-earnings ratio of 40.26 (versus the industry median of 20.2) and a price-book ratio of 10.16 (versus the industry median of 1.85).
The price-sales ratio is 12.22 (versus the industry median of 1) and the 52-week range is $55.69 to $130.96.
On Wall Street, the stock has one strong buy, one buy and nine hold recommendation ratings for an average target price of $126.50 per share.
Disclosure: I have no positions in any securities mentioned.
Read more here:
- 3 Stocks Trading Below the Peter Lynch Fair Value
- 3 High-Return Stock Picks
- A Trio of Potential Bargains
Not a Premium Member of GuruFocus? Sign up for a free 7-day trial here.
