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6 Top-Rated Stocks That Boast Stellar Net Profit Margins
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Investors prefer to put their money into businesses that reap profits on a regular basis. In order to gauge the extent of profits, there is no better metric than the net profit margin.
A higher net margin reflects the company’s efficiency in converting sales into actual profits.
Net Profit Margin = Net profit/Sales * 100.
In simple terms, net profit is the amount a company retains after deducting all costs, interest, depreciation, taxes and other expenses. In fact, net profit margin can turn out to be a potent point of reference to gauge the strength of a company’s operations and its cost-control measures.
Also, higher net profit is essential for rewarding stakeholders. Further, strength in the metric not only attracts investors but also draws well-skilled employees who eventually enhance a business’ value.
Moreover, a higher net profit margin compared with its peers provides the company a competitive edge.
Pros and Cons
Net profit margin helps investors gain clarity on a company’s business model in terms of pricing policy, cost structure and manufacturing efficiency. Hence, a strong net profit margin is preferred by all classes of investors.
However, net profit margin as an investment criterion has its own share of pitfalls. The metric varies widely from industry to industry. While net income is a key metric for investment measurement in traditional industries, it is not that important for technology companies.
In addition, the difference in accounting treatment of various items — especially non-cash expenses like depreciation and stock-based compensation — makes comparison a daunting task.
Furthermore, for companies preferring to grow with debt instead of equity funding, higher interest expenses usually weigh on net profit. In such cases, the measure is rendered ineffective, while analyzing a company’s performance.
The Winning Strategy
A healthy net profit margin and solid 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 returns from this strategy.
Screening Parameters
Net Margin 12 months – Most Recent (%) greater than equal to 0: High net profit margin indicates solid profitability.
Percentage Change in EPS F(0)/(F-1) greater than equal to 0: It indicates earnings growth.
Average Broker Rating (1-5) equal to 1: A rating of #1 indicates brokers’ extreme bullishness on the stock.
Zacks Rank less than or equal to 2: Stocks with a Zacks Rank #1 (Strong Buy) or 2 (Buy) generally perform better than their peers in all types of market environment. You can see the complete list of today’s Zacks #1 Rank stocks here.
VGM Score of A or B: Our research shows that stocks with a VGM Score of A or B, when combined with a Zacks Rank #1 or 2, offer the best upside potential.
Here are six of the 11 stocks that qualified the screen:
Lakeland Industries, Inc. (LAKE - Free Report) is one of the world’s leading manufacturers and sellers of protective clothing and accessories for industrial and public use. The stock currently flaunts a Zacks Rank of 1 and has a VGM Score of A. The Zacks Consensus Estimate for fiscal 2021 earnings has been revised upward to $2.33 from 78 cents in 60 days’ time.
Helen of Troy Limited (HELE - Free Report) is a leading consumer products player that operates through a diversified portfolio of renowned brands. The stock sports a Zacks Rank of 1 and has a VGM Score of B, at present. The Zacks Consensus Estimate of $9.73 for fiscal 2021 earnings moved up 14.2% over the past seven days.
Turning Point Brands, Inc. (TPB - Free Report) provides tobacco products. The company's product consists of moist snuff, loose leaf chewing tobacco, cigarette papers, make-your-own cigar wraps and cigar smoking tobacco, cigars and liquid and tobacco vapor. At present, the stock sports a Zacks Rank 1 and has a VGM Score of B. The Zacks Consensus Estimate of $2.10 for 2020 earnings moved 11.1% north over the past week.
Esquire Financial Holdings, Inc. (ESQ - Free Report) provides banking products and services to law professionals, professional service firms, small- to mid-sized businesses and individuals primarily in the United States. The stock currently carries a Zacks of 2 and has a VGM Score of A. The Zacks Consensus Estimate of $1.80 for the ongoing-year earnings moved up 5 cents in the past 30 days.
Progress Software Corporation (PRGS - Free Report) offers the leading platform for developing and deploying mission-critical business applications. Currently, the stock holds a Zacks Rank of #2 and has a VGM Score of A. The Zacks Consensus Estimate for fiscal 2020 earnings has been revised upward by 6 cents to $2.86 in 30 days’ time.
TTEC Holdings, Inc. (TTEC - Free Report) is a customer experience technology and services company. It focuses on the design, implementation and delivery of customer experience. This Zacks 2 Ranked player has a VGM Score of A, currently. The Zacks Consensus Estimate of $2.03 for this year’s earnings has moved 3 cents north over the past 30 days.
Get the rest of the stocks on the list and start putting this and other ideas to the test. It can all be done with the Research Wizard stock picking and back testing software.
The Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.
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.
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6 Top-Rated Stocks That Boast Stellar Net Profit Margins
Investors prefer to put their money into businesses that reap profits on a regular basis. In order to gauge the extent of profits, there is no better metric than the net profit margin.
A higher net margin reflects the company’s efficiency in converting sales into actual profits.
Net Profit Margin = Net profit/Sales * 100.
In simple terms, net profit is the amount a company retains after deducting all costs, interest, depreciation, taxes and other expenses. In fact, net profit margin can turn out to be a potent point of reference to gauge the strength of a company’s operations and its cost-control measures.
Also, higher net profit is essential for rewarding stakeholders. Further, strength in the metric not only attracts investors but also draws well-skilled employees who eventually enhance a business’ value.
Moreover, a higher net profit margin compared with its peers provides the company a competitive edge.
Pros and Cons
Net profit margin helps investors gain clarity on a company’s business model in terms of pricing policy, cost structure and manufacturing efficiency. Hence, a strong net profit margin is preferred by all classes of investors.
However, net profit margin as an investment criterion has its own share of pitfalls. The metric varies widely from industry to industry. While net income is a key metric for investment measurement in traditional industries, it is not that important for technology companies.
In addition, the difference in accounting treatment of various items — especially non-cash expenses like depreciation and stock-based compensation — makes comparison a daunting task.
Furthermore, for companies preferring to grow with debt instead of equity funding, higher interest expenses usually weigh on net profit. In such cases, the measure is rendered ineffective, while analyzing a company’s performance.
The Winning Strategy
A healthy net profit margin and solid 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 returns from this strategy.
Screening Parameters
Net Margin 12 months – Most Recent (%) greater than equal to 0: High net profit margin indicates solid profitability.
Percentage Change in EPS F(0)/(F-1) greater than equal to 0: It indicates earnings growth.
Average Broker Rating (1-5) equal to 1: A rating of #1 indicates brokers’ extreme bullishness on the stock.
Zacks Rank less than or equal to 2: Stocks with a Zacks Rank #1 (Strong Buy) or 2 (Buy) generally perform better than their peers in all types of market environment. You can see the complete list of today’s Zacks #1 Rank stocks here.
VGM Score of A or B: Our research shows that stocks with a VGM Score of A or B, when combined with a Zacks Rank #1 or 2, offer the best upside potential.
Here are six of the 11 stocks that qualified the screen:
Lakeland Industries, Inc. (LAKE - Free Report) is one of the world’s leading manufacturers and sellers of protective clothing and accessories for industrial and public use. The stock currently flaunts a Zacks Rank of 1 and has a VGM Score of A. The Zacks Consensus Estimate for fiscal 2021 earnings has been revised upward to $2.33 from 78 cents in 60 days’ time.
Helen of Troy Limited (HELE - Free Report) is a leading consumer products player that operates through a diversified portfolio of renowned brands. The stock sports a Zacks Rank of 1 and has a VGM Score of B, at present. The Zacks Consensus Estimate of $9.73 for fiscal 2021 earnings moved up 14.2% over the past seven days.
Turning Point Brands, Inc. (TPB - Free Report) provides tobacco products. The company's product consists of moist snuff, loose leaf chewing tobacco, cigarette papers, make-your-own cigar wraps and cigar smoking tobacco, cigars and liquid and tobacco vapor. At present, the stock sports a Zacks Rank 1 and has a VGM Score of B. The Zacks Consensus Estimate of $2.10 for 2020 earnings moved 11.1% north over the past week.
Esquire Financial Holdings, Inc. (ESQ - Free Report) provides banking products and services to law professionals, professional service firms, small- to mid-sized businesses and individuals primarily in the United States. The stock currently carries a Zacks of 2 and has a VGM Score of A. The Zacks Consensus Estimate of $1.80 for the ongoing-year earnings moved up 5 cents in the past 30 days.
Progress Software Corporation (PRGS - Free Report) offers the leading platform for developing and deploying mission-critical business applications. Currently, the stock holds a Zacks Rank of #2 and has a VGM Score of A. The Zacks Consensus Estimate for fiscal 2020 earnings has been revised upward by 6 cents to $2.86 in 30 days’ time.
TTEC Holdings, Inc. (TTEC - Free Report) is a customer experience technology and services company. It focuses on the design, implementation and delivery of customer experience. This Zacks 2 Ranked player has a VGM Score of A, currently. The Zacks Consensus Estimate of $2.03 for this year’s earnings has moved 3 cents north over the past 30 days.
Get the rest of the stocks on the list and start putting this and other ideas to the test. It can all be done with the Research Wizard stock picking and back testing software.
The Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.
Click here to sign up for a free trial to the Research Wizard today.
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.
Disclosure: Performance information for Zacks' portfolios and strategies are available at: https://www.zacks.com/performance/.