CRR CARBO Ceramics Inc

CHICAGO, March 9, 2011 /PRNewswire/ -- Stocks in this week's article include: Arch Chemicals, Inc. (NYSE: ARJ), Cabot Corp. (NYSE: CBT), CARBO Ceramics Inc. (NYSE: CRR), Deckers Outdoor Corp. (NASDAQ: DECK) and Super Micro Computer, Inc. (NASDAQ: SMCI). Kevin Matras looks at how to use Return on Equity (ROE) to find winning stocks.

(Logo: http://photos.prnewswire.com/prnh/20101027/ZIRLOGO)

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.

The formula for ROE is calculated as: Income / Average Shareholders Equity (past 12 months).

ROE is always expressed as a percentage. So a company with a ROE of 10%, for example, means it created 10 cents of assets for every one dollar of shareholder equity in a given year.

I think ROE is a great item to use regardless of what kind of investor you are. Seeing how a company makes use of its equity and the return it makes on it are important measures to look at. It can also alert you to problems when it's falling.

Another great way to use the ROE is to compare it to its Industry. Some industries require greater assets than others to run their business. If you screened for only absolute numbers, you may miss some great stocks in some great groups. So trying to find companies with the best ROEs relative to their group (Sector or Industry etc.) is one of the best ways of making an apples-to-apples comparison in an effort to find the top stocks.

ROE can be a powerful screening criterion for investors in measuring how effective management has become and how profitable they are in using investors' cash. And a better understanding of the factors that affect ROE and how to best use it will help make it even more valuable to you.

The screen I'm running this week has me looking for companies with…

For the rest of this Screen of the Week article, please visit Zacks.com at:  http://www.zacks.com/commentary/17229/

Sign up now for your free trial today and start picking better stocks immediately. And with the backtesting feature, you can test your ideas to see how you can improve your trading in both up markets and down markets. Don't wait for the market to get better before you decide to do better. Start learning how to be a better trader today: http://at.zacks.com/?id=111

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.

About Screen of the Week

Zacks.com created the first and best screening system on the web earning the distinction as the "#1 site for screening stocks" by Money Magazine.  But powerful screening tools is just the start. That is why Zacks created the Screen of the Week to highlight profitable stock picking strategies that investors can actively use. Each week, Zacks Profit from the Pros free email newsletter shares a new screening strategy. Learn more about it here http://at.zacks.com/?id=112

About Zacks

Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Leonard Zacks. As a PhD in mathematics Len knew he could find patterns in stock market data that would lead to superior investment results. Amongst his many accomplishments was the formation of his proprietary stock picking system; the Zacks Rank, which continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros.  In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros http://at.zacks.com/?id=113

Follow us on Twitter:  http://twitter.com/zacksresearch

Join us on Facebook:  http://www.facebook.com/ZacksInvestmentResearch  

Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.

Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.

Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.

SOURCE Zacks Investment Research, Inc.