12 U.S. stocks setting the pace for operational performance

What are we looking for?

Undercover U.S. industry leaders that we identify with an economic value-added (EVA) methodology.

The U.S. stock market is vast and diversified compared with its Canadian counterpart. Moreover, it serves as the trading venue for some of the world’s largest and most profitable companies.

Today, we’ll look for some of the thriving companies in this dynamic business landscape.

The screen (add the screener here)

We screened U.S. stocks, excluding financial companies, using the following criteria:

  • Market capitalization greater than US$5-billion;
  • StockPointer performance score (SP) greater than 80. The score mainly considers risk-adjusted return on capital, earnings-per-share growth and free cash flow per share. The score varies between zero and 100. A score of 80 or more implies a top performing company;
  • EVA on capital ratio greater than 10 per cent. We subtract the capital charge from the net operating profit after taxes. This result is then divided by the firm’s capital. A value exceeding 10 per cent indicates that the company is a top performer;
  • Three-month sales growth greater than 2 per cent;
  • Positive one-year price return.

For informational purposes, we have also included the market value-added (MVA) divided by the market capitalization and dividend yield.

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What we found

Economically attractive U.S. stocks

MA-N MASTERCARD INCORPORATED CLASS A 402.22 379.3 24.9 3.4 88.1 32.5 91.7 0.6
GWW-N W.W. GRAINGER, INC. 681.48 34.1 19.7 2.2 84.6 32.1 78.3 1.1
CHH-N CHOICE HOTELS INTERNATIONAL, INC. 121.24 6.1 17.0 4.0 82.3 10.3 73.6 1.0
ROL-N ROLLINS, INC. 37.43 18.4 14.9 3.9 85.1 6.9 89.1 1.4
V-N VISA INC. CLASS A 235.08 478.8 14.8 2.7 85.0 26.5 85.5 0.8
MSCI-N MSCI INC. CLASS A 513.16 40.6 14.5 3.0 86.9 17.3 90.7 1.1
WING-Q WINGSTOP, INC. 169.36 5.1 13.8 6.0 84.2 26.8 91.6 0.5
COKE-Q COCA-COLA CONSOLIDATED, INC. 655.26 6.1 13.6 2.3 88.3 52.5 58.5 0.3
MSFT-Q MICROSOFT CORPORATION 317.01 2356.0 12.0 2.1 85.7 33.7 84.2 1.0
CTAS-Q CINTAS CORPORATION 504.75 51.3 10.9 2.4 84.0 26.2 85.7 1.1
ALSN-N ALLISON TRANSMISSION HOLDINGS, INC. 59.12 5.3 10.4 4.2 81.2 69.5 40.9 1.6
LECO-Q LINCOLN ELECTRIC HOLDINGS, INC. 176.8 10.2 10.4 2.3 80.7 31.2 71.4 1.5

Mastercard Inc. leads our list with the highest EVA on capital, a remarkable 24.9 per cent, and an impressive SP performance score of 88.1. However, this exceptional performance comes with a notable price tag, as evidenced by Mastercard’s MVA to market capitalization ratio of 91.7 per cent. In practical terms, this means that for every dollar of market capitalization, just 8.3 per cent corresponds to tangible capital, which includes equity and debt. Mastercard and Visa Inc., another company on our list, wield considerable influence in the profitable credit-card market, holding an estimated 25.7-per-cent and 61.6-per-cent market share in 2022, respectively, according to the Nilson Report.

W.W. Grainger Inc. is a reputable industrial-supply company that provides businesses with a wide range of products, including tools, safety equipment, and maintenance and repair solutions. Largely undiscovered by consumers, the company is frequently dubbed the Amazon of the corporate world because of its extensive product offerings.

Choice Hotels International Inc. is a highly esteemed player in the hospitality sector, overseeing a diverse portfolio of renowned hotel brands. Despite being in the top three in our group for EVA on capital, it ranks fourth from the bottom in terms of MVA to market capitalization, at 73.4 per cent. It also recorded the second smallest one-year price return at 10.3 per cent. Over the past year, hotel occupancies reached or even exceeded prepandemic levels. Nevertheless, the stock market appears to be proceeding cautiously with this cyclical industry.

Investors are advised to do further research before investing in any of the companies listed in the accompanying table.

For more details about these stocks, subscribe to the Inovestor for Advisors platform for free.

Anthony Ménard, CFA, is vice-president of data management at Inovestor.