What is a good way to search for high-quality equities to invest in among a plethora of options? One method is to use a stock screener. This is a simple and efficient way to perform financial analysis and help investors make well-informed decisions based on the criteria selected. Further, it is a valuable tool to help navigate the market by limiting the number of choices based on key parameters that meet individual strategies.
The four stocks presented in this discussion were found using the Finviz stock screener. I focused on earnings per share growth, profitability and valuation. In addition to these key catalysts, institutional ownership is of importance. As such, the criteria I used consisted of:
- More than 30% earnings per share growth over the next five years.
- A forward price-earnings ratio below 15.
- A PEG ratio below 1.
- Institutional ownership over 50%.
- A net profit margin of at least 20%.
Of the stocks that qualified for the screener as of April, Ardomore Shipping Corp. (ASC, Financial), Earthstone Energy Inc. (ESTE, Financial), Pinnacle Financial Partners Inc. (PNFP, Financial) and Scorpio Tankers Inc. (STNG, Financial) stood out.
Ardmore Shipping
Operating within the industrials sector, Ardmore Shipping (ASC, Financial) specializes in transporting petroleum products and chemicals around the world. The company owns a fleet of 22 commercial vessels and five chartered vessels. Founded in 2010, the shipping company is headquartered in Bermuda.
The stock has a beta of 0.10, a trailing 12-month price-earnings ratio of 4.85, a forward dividend yield of 2.70% and a one-year target estimate of $19.50 according to MarketWatch. The year-to-date return of roughly 17% might not seem impressive, but the one-year return of around 190% is very remarkable. The net margin is 31.06% and diluted earnings per share grew 413.20% in 2022 to $3.52.
Earthstone Energy
Earthstone Energy (ESTE, Financial) is an oil and gas production company in the U.S. The main assets of this energy player are located in Texas and New Mexico. The company, which was founded in 1969, is headquartered in The Woodlands, Texas.
Shares of Earthstone have a beta of 1.32, a price-earnings ratio of 3.09 and, according to MarketWatch, a one-year target estimate of $26.50. While the stock has rallied about 27.35% over the past month on the back of higher energy prices, it has only gained about 8% year to date.
The company's net margin is 26.69%. Its diluted earnings per share grew 256.86% in 2021 and 579.32% in 2022.
Pinnacle Financial Partners
Pinnacle Financial Partners (PNFP, Financial) is a bank holding company. Founded in 2000 and headquartered in Nashville, Tennessee, the company also operated in North Carolina, South Carolina, Virginia, Georgia and Alabama.
There has been a lot of turmoil over the past month due to the bank crisis, which was sparked by the collapse of Silicon Valley Bank (SIVBQ, Financial) and Signature Bank (SBNY, Financial). This has affected Pinnacle Financial Partners' stock, which has recorded year-to-date losses of nearly 28% and a one-year loss of approximately 38%. One of the classic adages in investing is to “by low, sell high,” so the stock may be a good value opportunity currently. While it is risky to invest in stocks that have been sold off while ignoring their fundamentals, Pinnacle Financial has several high-quality characteristics.
Pinnacle's shares are trading with a beta of 0.67 and a price-earnings ratio of 7.38. The company also has a forward dividend yield of 1.57. MarketWatch's one-year price target of $75.75 implies a potential upside of approximately 43%. The net margin of 42.62% is also impressive.
Scorpio Tankers
Scorpio Tankers (STNG, Financial) is a midstream energy company. Headquartered in Monaco, the company transports refined petroleum products using its fleet of 113 owned or leased tankers. It was founded in 2009.
The high oil prices so far in 2023 have established a favorable scenario for the shipping company. The stock is trading with a beta of -0.10 and a price-earnings ratio of 5.49. It aslo has a forward dividend yield of 1.33%. If MarketWatch's analysts prove to be correct, then the one-year target price of $70.87 implies a potential upside of nearly 25%.
Investors have been rewarded with a one-year return of more than 150%. However, the stock is up only about 15% year to date. Should oil prices remain elevated throughout 2023, the company is expected to report high revenue growth and profitability.
Sitting at 40.77%, the company's net margin is also impressive. Further, diluted earnings per share grew 334.19% in 2022.
Final thoughts
Since the screener is only a tool used to isolate potential investments based on specific key criteria, investors interested in the four companies discussed should do further research to determine whether or not they meet their individual investment needs. They are a good starting point, however, in finding other possible opportunities.
