Chicago, IL – January 19, 2010- Kevin Matras looks at how to use Return on Equity (ROE) to find winning stocks. Stocks in this week’s article include Meredith Corporation (NYSE: MDP), The Estee Lauder Companies Inc. (NYSE: EL), Signet Jewelers Ltd. (NYSE: SIG), Cooper Tire & Rubber Company (NYSE: CTB) and OM Group, Inc. (NYSE: OMG).
Screen of the Week written by Kevin Matras of Zacks Investment Research:
Return on Equity, or ROE, is a commonly used measure of management efficiency. It’s a favorite screening criterion of many money managers and investors, including myself, because it tells you how successful a company is at using its shareholders’ capital.
Moreover, companies with steadily increasing ROEs are generally better managed with attention being paid to the details.
I think ROE is a great item to use regardless of what kind of investor you are – whether it be Growth & Income, Value or even Aggressive Growth or Momentum. Seeing how a company makes use of its equity, and the return it makes on it, is an important measure to look at.
It can also alert you to problems.
A better understanding of the factors that affect ROE, and how to best use it, will help make this criteria even more valuable to you.
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