Top 5 stocks with a strong net profit margin

The net profit margin is the most important entry in an income statement because it demonstrates the wealth of a business. It determines the efficiency of a company in the deployment of its resources, which makes it the best indicator to measure its profitability.

The net profit margin= Net profit/Sales * 100.

Simply put, net income is the amount a business keeps after deducting all costs, interest, depreciation, taxes, and other expenses. In fact, the net profit margin can prove to be a powerful benchmark for assessing the strength of a company’s operations and cost control measures.

In addition, a higher net profit is essential to reward stakeholders. Moreover, the strength of the metric not only attracts investors, but also attracts well-qualified employees who end up adding to the value of the company.

In addition, a higher net profit margin than its peers gives the company a competitive advantage.

Advantages and disadvantages

Net profit margin helps investors better understand a company’s business model in terms of pricing policy, cost structure, and manufacturing efficiency. Therefore, a high net profit margin is preferred by all categories of investors.

However, the net profit margin as an investment criterion has its set of pitfalls. The measurement varies considerably from sector to sector. While net income is a key metric for measuring investment in traditional industries, it is not that important for technology companies.

In addition, the difference in the accounting treatment of various items – especially non-cash expenses like depreciation and stock-based compensation – makes comparison a difficult task.

Plus, for companies that prefer to grow with debt rather than equity financing, higher interest charges usually weigh on bottom line. In such cases, measurement is rendered ineffective when analyzing a company’s performance.

The winning strategy

A healthy net profit margin and strong EPS growth are the two most sought-after elements in a business model.

Apart from these, we have added a few criteria to ensure maximum return from this strategy.

Screening parameters

12-month net marginMost recent (%) greater than equal to 0: A high net profit margin indicates strong profitability.

Percentage change in F (0) / (F-1) BPA greater than equal to 0: It indicates profit growth.

Average broker rating (1-5) equal to 1: A rating of # 1 indicates the extreme optimism of brokers on the stock.

Zacks Rank less than or equal to 2: Stocks with a Zacks # 1 (strong buy) or 2 (buy) rank generally perform better than their peers in all types of market environment. The full list of today’s Zacks # 1 Rank stocks here

VGM scorefrom A or B: Our research shows that stocks with a VGM score of A or B when combined with a rank 1 or 2 of Zacks offer the best upside potential.

Here are five of the 23 actions that qualified the screen:

Based in Evansville, IN, Shoe Carnival, Inc. SCVL offers men, women and children a wide assortment of dress, casual and sporty shoes at moderate prices, with a focus on national and regional brands. Zacks’ consensus estimate for fiscal 2020 net income rose 3.6% northward to $ 2.88 in the past 30 days. The action has a Zacks rank of 1 and a VGM score of A.

Chicago based Enova International Inc. ENVA is an online financial services provider. The stock is a # 1 ranked player and has a VGM score of A. Additionally, Zacks’ consensus estimate for 2019 earnings of $ 3.97 has been consistent over the past 30 days.

Irvine, California Tilly’s Inc. TLYS is a specialist retailer in the action sports industry, selling clothing, footwear and accessories. The stock is ranked # 1 by Zacks and has a VGM score of A. In addition, Zacks’ consensus estimate for fiscal 2020 earnings of 88 cents has been revised 6% upwards over the course of of the last 30 days.

Chicago, Illinois SP Plus Company SP is a provider of professional parking, ground transportation, facility maintenance, security and event logistics services to property owners and managers in all real estate markets. The company is ranked # 1 and has a VGM score of B. Zacks’ consensus estimate for 2019 earnings has remained stable at $ 2.79 for the past 30 days.

headquartered in Beijing Momo Inc. MOMO provides a mobile social networking platform, primarily in the People’s Republic of China. The stock is a No.1 ranked player and has a VGM score of B. Zacks’ consensus estimate of $ 2.8 for fiscal 2019 earnings has been increased by 1.8% over the past 30 years. last days.

Get the rest of the actions on the list and start testing this idea and others. All of this can be done with Research Wizard stock picking and backtesting software.

The Research Assistant is a great place to start. It’s easy to use. Everything is in plain language. And it’s very intuitive. Start your research assistant trial today. And the next time you read an economic report, open the research assistant, plug in your findings, and see what gems are coming out.

Click here to sign up for a free trial of the Research Assistant today.

Disclosure: Officers, directors and / or employees of Zacks Investment Research may own or have sold securities short and / or hold long and / or short positions in options mentioned in this document. An affiliated investment advisory firm may own or have sold securities short and / or hold long and / or short positions in options mentioned in this document.

Disclosure: Information on the performance of Zacks’ portfolios and strategies can be found at: https://www.zacks.com/performance.

Want the latest recommendations from Zacks Investment Research? Today you can download 7 best stocks for the next 30 days. Click to get this free report

Momo Inc. (MOMO): Free Stock Analysis Report

Enova International, Inc. (ENVA): Free Stock Analysis Report

Tilly’s, Inc. (TLYS): Free Stock Analysis Report

Shoe Carnival, Inc. (SCVL): Free Stock Analysis Report

SP Plus Corporation (SP): Free Stock Analysis Report

To read this article on Zacks.com, click here.

Zacks investment research


Source link

Comments are closed.