Zacks.com featured highlights include: Medifast, Shoe Carnival, Marine Products, Amedisys and NVR

For Immediate Release

Chicago, IL – June 21, 2019 - Stocks in this week’s article are Medifast Inc MED, Shoe Carnival Inc. SCVL, Marine Products Corp. MPX, Amedisys Inc. AMED and NVR Inc. NVR.

Bet Big on DuPont Analysis with These Top 5 Picks

Return on equity is an investor-favorite metric when it comes to cherry-picking quality stocks. But ROE doesn’t always tell the complete story and an investor might make a mistake by selecting stocks based on this ratio.  Thus, taking a step beyond the basic ROE and analyzing it at an advanced level or applying the DuPont technique seem a prudent decision.

Here is how DuPont breaks down ROE into its different components:

ROE = Net Income/Equity

Net Income / Equity = (Net Income / Sales) * (Sales / Assets) * (Assets / Equity)

ROE = Profit Margin * Asset Turnover Ratio * Equity Multiplier

Why Use DuPont?

Although one can’t play down the importance of normal ROE calculation, the fact remains that it doesn’t always provide a complete picture. The DuPont analysis, on the other hand, allows investors to assess the elements that play a dominant role in any change in ROE. It can help investors to segregate companies having higher margins from those having high turnover. For example, high-end fashion brands generally survive on high margin as compared with retail goods, which rely on higher turnover.

In fact, it also sheds light on the company’s leverage status, which can go a long way in selecting stocks poised for gains. A lofty ROE could be due to the overuse of debt. Thus, the strength of a company can be misleading if it has a high debt load.

So, an investor confined solely to an ROE perspective may be confused if he or she has to judge between two stocks of equal ratio. This is where DuPont analysis wins over and spots the better stock.

Investors can simply do this analysis by taking a look at the company’s financials. However, looking at financial statements of each company separately can be a tedious task. Screening tools like Zacks Research Wizard can come to your rescue and help you shortlist the stocks that look impressive with a DuPont analysis.

For the rest of this Screen of the Week article please visit Zacks.com at: https://www.zacks.com/stock/news/432009/bet-big-on-dupont-analysis-with-these-top-5-picks

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