Zacks.com featured highlights: Macy's, Discovery Communications, Zoetis, Boston Scientific and Priceline Group

For Immediate Release

Chicago, IL – August 22, 2016 - Stocks in this week's article include: Macy's, Inc. M, Discovery Communications, Inc. DISCK, Zoetis Inc. ZTS, Boston Scientific Corporation ( BSX) and Priceline Group Inc. PCLN.

Screen of the Week of Zacks Investment Research:

Top ROE Stocks to Play in a Raging Bull Market

The curtains are almost down on the second-quarter reporting cycle with earnings growth for the S&P 500 index remaining in the negative territory. Yet, results show a sequential improvement and impressive beat ratios, igniting hopes of an inflection point in the vicinity.

However, an aging bull market that is currently running for over 89 months raises an element of doubt among investors who dread a market correction with stocks hovering near their record highs.

As investors scout for cherry pickings, they are often on the lookout for ‘cash cow' stocks that would enable them to milk more cash or profits.

However, singling out cash-rich stocks alone does not make them a solid investment proposition unless they are backed by attractive efficiency ratios like return on equity (ROE). A high ROE ensures that the company is reinvesting its cash at a high rate of return.

ROE: An Effective Financial Metric

ROE = Net Income/Shareholders' Equity

ROE helps investors distinguish between profit-generating companies from profit burners and is useful for determining the financial health of a company. In other words, this financial metric enables investors to identify stocks that diligently deploy cash for higher returns.

Moreover, ROE is often used to compare the profitability of a company with other firms in the industry – the higher the better. It measures how well a company is growing its profits without investing any new equity capital in the business and portrays management efficiency in rewarding shareholders with attractive risk-adjusted returns.

Screening Parameters for Solid ROE Stocks

In order to shortlist stocks that are cash rich with high ROE, we added Cash Flow greater than $1 billion and ROE greater than X-Industry as our primary screening parameters. In addition, we take a few other criteria into consideration to arrive at a winning strategy.

Price/Cash Flow less than X-Industry: This metric measures how much investors pay for one dollar of free cash flow. A lower ratio indicates that investors need to pay less for a better cash flow generating stock.

Return on Assets (ROA) greater than X-Industry: This metric determines how much profit a company earns for every dollar of asset, which includes cash, accounts receivable, property, equipment, inventory and furniture. Of course, the higher the ROA, the better it is.

5-Year EPS Historical Growth greater than X-Industry: This criterion indicates that continued earnings momentum has translated to solid cash strength.

Zacks Rank less than or equal to 2: Zacks Rank #1 (Strong Buy) or 2 (Buy) stocks are known to outperform irrespective of the market environment.

Here are 5 of the 11 stocks that qualified the screening:

Macy's, Inc. (M): Based in Cincinnati, OH, Macy's is one of the leading department store retailers in the U.S., operating approximately 870 outlets under the names of Macy's, Bloomingdale's, Bloomingdale's Outlet, Macy's Backstage and Bluemercury. This Zacks Rank #2 stock has a decent long-term earnings growth expectation of 8.5% and a healthy trailing four-quarter average earnings surprise of 16.3%.

Discovery Communications, Inc. (DISCK): Headquartered in Silver Spring, MD, this Zacks Rank #2 stock operates as a global media firm with 3 billion subscribers in more than 220 countries. Discovery Communications offers high-quality content through global brands like Discovery Channel, TLC, Investigation Discovery, Animal Planet and Discovery Science. The stock has a healthy trailing four-quarter average earnings surprise of 16.3%.

Zoetis Inc. (ZTS): Founded in 1952 and headquartered in Florham Park, NJ, Zoetis manufactures and markets veterinary vaccines, medicines, diagnostic products and related services for livestock and companion animals across the globe. This Zacks Rank #2 stock has a solid long-term earnings growth expectation of 12.6% and a trailing four-quarter average earnings surprise of 15.9%.

Boston Scientific Corporation (BSX): Headquartered in Natick, MA, and founded in 1979, Boston Scientific manufactures medical devices and products used in various interventional medical specialties worldwide. This Zacks Rank #2 stock has a trailing four-quarter average earnings surprise of 6.3% and long-term earnings growth expectation of 10.9%.

The Priceline Group Inc. (PCLN): Norwalk, CT-based Priceline is one of the largest online travel companies in the world. The company's travel-related offerings cover hotel rooms, airline tickets, rental cars, vacation packages, cruises, "things to do" at customer destinations and travel insurance. This Zacks Rank #2 stock has a solid long-term earnings growth expectation of 18.3% and a trailing four-quarter average earnings surprise of 6.6%.

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Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.

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Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.

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