3 High Return Non-Cyclical Stock Picks
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When screening the market for high return investments amid non-cyclical stocks, investors may want to consider the three companies listed below, as their earnings yields (as calculated via Joel Greenblatt (Trades, Portfolio)'s method) are outperforming the S&P 500.
Greenblatt calculates the earnings yield as the company's earnings before interest and tax (Ebit) divided by its enterprise value. This ratio represents a more reliable reference for the evaluation of non-cyclical stocks, whose earnings have little or no correlation with the business cycle (as the metric only looks at 12 months of operating activities).
As of the writing of this article, the S&P 500's historical high earnings yield was 9.8%. The following companies are doing better than the S&P 500 in terms of a higher earnings yield.
Adecoagro SA
The first stock investors may want to consider is Adecoagro SA (NYSE:AGRO). Based in Luxembourg, this farm products company engages in farming crops, various other agricultural products and dairy operations conducted on 220,186 hectares extending across Argentina, Brazil and Uruguay. In South America, the company is also engaged in land transformation activities and the production of energy through the operation of plants for an aggregate of 241 megawatts of installed cogeneration capacity.
The stock grants an earnings yield of 13.48% as of the March 2021 quarter. This stands well above the median point of the past 10-year historical earnings yield range of 1.69% to 23.17%. Adecoagro SA's earnings yield ranks higher than 83% of 1,767 companies that are operating in the consumer packaged goods industry.
The share price was trading at around $10.87 at close on Thursday for a market capitalization of $1.26 billion and a 52-week range of $4.09 to $11.77. The stock has gained 136.82% over the past year.
Its price-earnings ratio is 17.15 and the price-book ratio is 1.35.
Currently, Adecoagro SA does not pay dividends.
On Wall Street, as of June, the stock has a median recommendation rating of overweight with an average target price of about $11.21 per share.
Route One Investment Company, L.P. dominates in the group of top fund holders of the company with 12.34% of shares outstanding. It is followed by EMS Capital LP with 9.99% of shares outstanding and Charles Brandes (Trades, Portfolio) with 4.05% of shares outstanding.
Perdoceo Education Corp
The second stock investors may want to consider is Perdoceo Education Corp (NASDAQ:PRDO), a Schaumburg, Illinois-based provider of education and training services to U.S. students in various career-oriented disciplines through online and other learning programs.
The company grants an earnings yield of 33.56% as of the March 2021 quarter. This stands significantly above the median point of the 10-year historical range of -14,745.9% to 13,566.49% and ranks higher than 94% of the 234 companies that are operating in the education industry.
The share price was trading at around $13.07 at close on Thursday for a market capitalization of $918.89 million and a 52-week range of $10.62 to $17.49. The stock has fallen by 16.75% over the past year.
Its price-earnings ratio is 7.38 and the price-book ratio is 1.56.
Currently, Perdoceo Education Corp does not pay dividends.
On Wall Street, as of June, the stock has a median recommendation rating of buy with an average target price of $22 per share.
BlackRock Inc. leads the group of top fund holders of the company with 16.07% of shares outstanding, followed by Jim Simons (Trades, Portfolio) with 7.47% of shares outstanding and Vanguard Group Inc with 7.31% of shares outstanding.
Quest Diagnostics Inc
The third stock investors may want to consider is Quest Diagnostics Inc (NYSE:DGX), a Secaucus, New Jersey-based diagnostics and research services provider.
The company grants an earnings yield of 12.59% as of the March 2021 quarter, standing above the median point of the 10-year historical range of 5.33% to 16.92%, and ranking higher than 93% of 252 companies that are operating in the medical diagnostics and research industry.
The share price was trading at $128.09 at close on Thursday for a market capitalization of $15.51 billion and a 52-week range of $103.26 to $142.80. The stock has gained nearly 18.31% over the past year.
Its price-earnings ratio is 9.73 and the price-book ratio is 2.49.
Currently, Quest Diagnostics Inc pays quarterly dividends, with the next payment, 62 cents per common share (in line with the previous one), to issue on July 21, for a forward dividend yield of 1.95% as of June 17.
On Wall Street, as of June, the stock has a median recommendation rating of overweight with an average target price of $145.20 per share.
Among the top fund holders of the company, Vanguard Group Inc is the leader with 11.77% of shares outstanding. It is followed by BlackRock Inc. with 9.63% and State Street Corp, holding 4.99%.
Disclosure: I have no position in any security mentioned.
This article first appeared on GuruFocus.
