Equity markets across the globe witnessed a bloodbath last Friday due to the Brexit referendum. As the news spread like a wildfire, about $2.1 trillion of investor wealth was wiped out from the global markets – reportedly the heaviest suffered in a single market day.

Though the markets have bounced back, the situation still remains volatile, where money can play a key role in surviving carnage. So, investors are often on the lookout for "cash cow" stocks to milk more cash or profits to avert capital flight.

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 Tool

ROE = Net Income/Shareholders’ Equity

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

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. However, these are not the ultimate criteria for short listing stocks in a turbulent market. As such, we have added a few additional criteria to arrive at a winning strategy to mint money.   

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 its assets, which include 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:

Altria Group, Inc. (MO - Analyst Report) : Headquartered in Richmond, VA, Altria manufactures and sells cigarettes, smokeless products, and wine through its subsidiaries. This Zacks Rank #2 (Buy) stock has a healthy long-term earnings growth expectation of 7.5%.

Braskem S.A. (BAK - Snapshot Report) : Headquartered in São Paulo, Brazil, Braskem has the largest petrochemical operation in Latin America. This Zacks Rank #1 (Strong Buy) stock is the leading thermoplastic resins (polyethylene, polypropylene and PVC) producer in the Americas and the largest producer of polypropylene in the U.S.

Zoetis Inc. (ZTS - Analyst Report) : 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 16.4%.

Mobile TeleSystems PJSC (MBT - Snapshot Report) : This Zacks Rank #1 stock offers telecommunication services  like wireless Internet access and fixed voice, broadband and pay-TV to over 100 million customers in Russia, Central and Eastern Europe.

Citrix Systems, Inc. (CTXS - Analyst Report) : Headquartered in Fort Lauderdale, FL, Citrix offers an integrated portfolio of Workspace-as-a-Service, application delivery, virtualization, mobility, network delivery and file sharing solutions. This Zacks Rank #2 stock has a solid long-term earnings growth expectation of 12.2% and a trailing four-quarter average earnings surprise of 36.6%.