Many big name apparel stores will be releasing their earnings this month, at the tail end of the second quarter earnings season. If like many others you’re excited by the possibility of trading earnings season and trying to catch undervalued names, we created a list to get you started on your search.
To get in on the potential for a positive earnings surprise we started by screening apparel stocks yet to report earnings for encouraging DuPont Analysis.
The DuPont equation takes into account the firm’s Return on Equity (ROE). In its simplest form ROE represents (Net Profits/Average Equity). Generally, the higher the ROE, the more profitable the company is.
Dupont stretches that equation into 3 parts:
= (Net Profit/Equity)
= (Net profit/Sales)*(Sales/Assets)*(Assets/Equity)
= (Net Profit margin)*(Asset turnover)*(Leverage ratio)
This way we can examine the strength of major sources of profitability. In general, a rise in net profits or asset efficiency is considered positive source of growth, while a rise in the leverage ratio (debt) is generally considered a negative characteristic. Thus, we screened for firms with an increasing Net Profit margin and Asset turnover, and a decreasing Leverage ratio.
Business Section: Investing Ideas
Do you think that the following firms will post positive earnings surprises as a result of their bullish signs of profitability? Earnings dates are included in the list, be sure to mark your calendar!
Use the Turbo Chart to Compare the Performance of the First Two Companies in the List to the S&P 500:
1. American Eagle Outfitters, Inc. (AEO, Earnings, Analysts, Financials): Operates as an apparel and accessories retailer in the United States and Canada. Market cap at $3.9B, most recent closing price at $20.22. MRQ net profit margin at 5.52% vs. 4.65% y/y. MRQ sales/assets at 0.375 vs. 0.333 y/y. MRQ assets/equity at 1.303 vs. 1.341 y/y. Earnings date is 8/20.
2. Express Inc. (EXPR, Earnings, Analysts, Financials): Operates specialty retail stores in the United States. Market cap at $1.4B, most recent closing price at $15.75. MRQ net profit margin at 8.48% vs. 7.49% y/y. MRQ sales/assets at 0.564 vs. 0.562 y/y. MRQ assets/equity at 2.692 vs. 4.975 y/y. Earnings date is 8/20.
3. Ross Stores Inc. (ROST, Earnings, Analysts, Financials): Operates off-price retail apparel and home accessories stores under the Ross Dress for Less and dd’s DISCOUNTS brand names in the United States. Market cap at $14.95B, most recent closing price at $67.63. MRQ net profit margin at 8.85% vs. 8.34% y/y. MRQ sales/assets at 0.682 vs. 0.669 y/y. MRQ assets/equity at 2.147 vs. 2.206 y/y. Earnings date is 8/16.
4. Zumiez, Inc. (ZUMZ, Earnings, Analysts, Financials): Zumiez Inc., founded in 1978, is a mall-based specialty retailer providing sports-related apparel, footwear, equipment, and accessories. Market cap at $1.01B, most recent closing price at $33.96. MRQ net profit margin at 3.49% vs. 1.79% y/y. MRQ sales/assets at 0.343 vs. 0.337 y/y. MRQ assets/equity at 1.351 vs. 1.359 y/y. Earnings date is 8/30.
(Written by Ryan Horch)
Use Kapitall’s Tools: Looking for ways to analyze this list?
Use this article snapshot as a launch pad (click here for help): Simply click on the links, and use Kapitall’s tab navigation to browse through the data…
Analyze These Ideas: Getting Started
- Read descriptions for all companies mentioned
- Access a performance overview for all stocks in the list
- Compare analyst ratings for the companies mentioned
- Compare analyst ratings to annual returns for stocks mentioned
- Real-Time Opinion: Scan the latest tweets about these companies (feed will open in a new window)
Dig Deeper: Access Company Snapshots, Charts, Filings
- American Eagle Outfitters, Inc. (AEO, Chart, Download SEC Filings)
- Express Inc. (EXPR, Chart, Download SEC Filings)
- Ross Stores Inc. (ROST, Chart, Download SEC Filings)
- Zumiez, Inc. (ZUMZ, Chart, Download SEC Filings)
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