As investors monitor earnings reports from Big Tech and possible market volatility, five predictable growth companies with high returns on equity over the past five years and low valuations are Check Point Software Technologies Ltd. (CHKP, Financial), MarketAxess Holdings Inc. (MKTX, Financial), SEI Investments Co. (SEIC, Financial), Boston Beer Co. (SAM, Financial) and Usana Health Sciences Inc. (USNA, Financial).
Dow hits new intraday record ahead of Big Tech earnings
On Tuesday, the Dow Jones Industrial Average closed at 35,756.88, up 15.73 points from Monday’s close of 35,741.15 but down 101.87 points from the intraday high of 35,892.92.
Stocks surged in early market trading on the back of strong company earnings, yet volatility remains ahead of earnings from Big Tech companies. Ryan Detrick, chief market strategist at LPL Financial, added that while the third-quarter earnings season had a great start, technology companies “will need to impress” to help justify the stock levels.
As such, investors may find opportunities in stocks that have predictable revenue growth and are trading below GF Value. Patterned after legendary Fidelity Magellan Fund investor Peter Lynch’s earnings line, GuruFocus’ exclusive valuation method considers a company’s historical price multiples and adjusts for past performance and future growth expectations.
Premium Plus members can further screen for companies that had high returns on equity across multiple years using the Historical Data Screen feature.
Check Point Software Technologies
Shares of Check Point Software (CHKP, Financial) traded around $121.75, showing the stock is modestly undervalued based on Tuesday’s price-to-GF Value ratio of 0.87.
GuruFocus ranks the Israeli cybersecurity company’s profitability 9 out of 10 on several positive investing signs, which include a 4.5-star business predictability rank, a high Piotroski F-score of 8 and profit margins and returns that outperform more than 90% of global competitors.
Gurus with holdings in Check Point include John Rogers (Trades, Portfolio)’ Ariel Investment and Jim Simons (Trades, Portfolio)’ Renaissance Technologies.
MarketAxess
Shares of MarketAxess (MKTX, Financial) traded around $407.64, showing the stock is modestly undervalued based on Tuesday’s price-to-GF Value ratio of 0.77.
GuruFocus ranks the New York-based capital markets company’s profitability 9 out of 10 on several positive investing signs, which include a five-star business predictability rank, a return on equity that outperforms more than 85% of global competitors, and an operating margin that has increased approximately 1% per year on average over the past five years.
Gurus with holdings in MarketAxess include Baillie Gifford (Trades, Portfolio) and PRIMECAP Management (Trades, Portfolio).
SEI Investments
Shares of SEI Investments traded around $64.50, showing the stock is fairly valued based on Tuesday’s price-to-GF Value ratio of 0.95.
GuruFocus ranks the Oaks, Pennsylvania-based asset management company’s profitability 9 out of 10 on several positive investing signs, which include a 4.5-star business predictability rank, a high Piotroski F-score of 9 and a return on equity that outperforms more than 73% of global competitors.
Boston Beer
Shares of Boston Beer (SAM, Financial) traded around $496, showing the stock is significantly undervalued based on Tuesday’s price-to-GF Value ratio of 0.68.
GuruFocus ranks the Boston-based beer company’s profitability 8 out of 10 on several positive investing signs, which include a 4.5-star business predictability rank and a return on equity that outperforms more than 85% of global competitors.
Usana Health Sciences
Shares of Usana Health Sciences (USNA, Financial) traded around $100.17, showing the stock is fairly valued based on Tuesday’s price-to-GF Value ratio of 0.96.
GuruFocus ranks the Salt Lake City-based nutrition and personal care product company’s profitability 8 out of 10 on several positive investing signs, which include a four-star business predictability rank and profit margins and returns that outperform more than 85% of global competitors.
