Most investors are familiar with earnings yields, the inverse of the price-earnings ratio. However, there are two ways to use the metric: Magic Formula creator Joel Greenblatt divides operating earnings into enterprise value, while others simply divide net income into market cap. Joe Ponzio, author of the bestselling "

F Wall Street",

uses a minimum 13% earnings yield to screen for good companies. By that same standard, here are four stocks with impressive earnings yields.

IN PICTURES: 9 Simple Investing Ratios You Need To Know

Company Earnings Yield
Conrad Industries (OTCBB:CNRD) 96.7%
Skechers (NYSE:SKX) 25.7%
Western Digital (NYSE:WDC) 36.8%
Ford (NYSE:F) 4.8%

Micro Cap - Conrad Industries
Louisiana-based Conrad Industries is in the shipbuilding and repair business, with a significant portion of its revenue coming from regional oil and gas customers. In 2007, these customers accounted for 43.5% of revenues. By the end of 2009, this was down to less than 20%. In 2010, the deepwater drilling moratoriums in the Gulf of Mexico continue to contribute to declining revenues from the oil and gas industry and management expects both revenues and margins in the second half of the year to be lower. I see its total revenue remaining around $117 million for all of 2010 and operating earnings of $13 million, which would mean a 20% decline from 2009 revenues and a 31% drop in operating income. Whether it's this bad remains to be seen. All I know is that with over $4 per share in cash, the upside is far greater than the downside.

Small Cap - Skechers
Jonathan Heller's September 29 article at TheStreet.com highlighted reasons why Skechers stock is currently cheap. The figure that caught my attention was the net current asset value. Skechers stock traded at less than NCAV in March 2009 and now trades at slightly less than two times NCAV. That's still good, considering that Steven Madden (NYSE:SHOO) trades at 9.3 times NCAV, Deckers (Nasdaq:DECK) at 4.4 times and Timberland (NYSE:TBL) at 2.7 times. Investors are skeptical about Skechers' claim that "Shape-Up" toning shoes actually burn more calories than traditional sneakers. In addition, some analysts are concerned about the company's third-quarter inventory levels, which are expected to be as high as $300 million, 50% greater than in Q3 2009. As a result, Sterne, Agee & Leach analyst Sam Poser reduced his price target on Skechers from $52 to $38. This won't be a problem if sales in the third quarter rise by an equal amount and Skechers continues to get higher price points on its shoes, as it did in the second quarter. In addition, if the company continues to keep a tight reign on SG&A expenses, profits are going to be significant. Skechers stock has hit $30 on three occasions since 1999; the first time was in 2001, the second in late 2006 and most recently in March 2010. By most valuation metrics, Skechers stock is cheap. My concern is whether the company will be able to collect on its growing receivables. If so, I believe the company has at least an even chance of hitting $38 before the end of 2011.

Mid Cap - Western Digital
There's a lot to like about this hard drive manufacturer. I may not be overly tech-savvy, but from my vantage point, this stock becomes a good buy every time it retreats in price. On January 5, 2010, Western Digital stock traded at a three-year high of $47.44. Since then, it's dropped 41%. The reason? The most prominent culprit is tablet computers like the iPad, which use flash drives instead of hard drives. Wedbush Securities analyst Kaushik Roy believes tablets will cut into Western Digital's earnings per share (EPS) by 20 cents in 2011 or about 5%. Analysts estimate 2011 earnings of $3.64 and $4.22 in 2012. Let's chop 20% off both of those numbers to account for lost revenue. That would mean EPS of $2.91 and $3.38. At current prices, you're looking at a forward P/E between 8.4 and 9.7 times earnings. When you consider that Western Digital stock traded at 14.4 times earnings in 2005, with one-third of the revenue and one-eighth of the earnings, you can't help but see a possible opportunity.

Large Cap - Ford
I'm an all-cap investor, and I believe that portfolios should have an equal amount of micro caps, small caps, mid caps and large caps. When I did my screen to find stocks for this article, I looked for companies whose trailing P/Es were between 1 and 7.7. The only large cap that met this criterion was Ford's P/E of 7.64, which represents an earnings yield of 13.1%. However, using Greenblatt's method, the earnings yield drops to 4.8%. This could change in a hurry. Credit Suisse analyst Chris Ceraso's 2011 estimate is $1.40 a share, producing a net income of $4.82 billion, Ford's highest profit in the last decade. If the operating profit is $14.5 billion, the company's forward earnings yield is around 11% (based on its current enterprise value of $129 billion). EPS higher than Ceraso's would likely deliver a 13% earnings yield. Have you driven a Ford lately?

Bottom Line
If you were to own only these four stocks, my guess is you'd do just fine. (For more, see Projected Returns: Honing The Craft.)

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