Investors always look for companies with a high level of profitability regardless of the present market condition. In this context, profitability analysis is used to identify a profitable company over a loss-making one. Profitability analysis is the best tool to measure the ability of the company to offer sturdy returns to investors even after meeting all its operating and non-operating costs.
Here, we have used the concept of accounting ratios to evaluate a company’s profitability. There is a variety of profitability ratios, from which we have chosen the most successful and frequently used profitability metric to determine the bottom-line performance of a company.
Net Income Ratio
Net income ratio gives us the exact profitability level of a company. It reflects the percentage of net income to total sales revenues. Using net income ratio, one can determine a company’s effectiveness to meet operating and non-operating expenses from revenues. A higher net income ratio usually implies a company’s ability to generate ample revenues and successfully manage all business functions.
Net income ratio is one of our key screening parameters. However, to find out the sure winners, we have added a few additional criteria to arrive at an efficient strategy.
Zacks Rank Equal to #1: No matter whether the market is good or bad, stocks with a Zacks Rank #1 (Strong Buy) have a proven history of outperformance. You can see . the complete list of today’s Zacks #1 Rank stocks here Trailing 12-Month Sales and Net Income Growth Higher than X Industry: Stocks that have witnessed higher-than-industry sales and net income growth in the past 12 months are positioned to perform well. Trailing 12-Month Net Income Ratio Higher than X Industry: High net income ratio indicates a company’s solid profitability. Percentage Rating Strong Buy greater than 70: This indicates that 70% of the current broker recommendations for the stock are Strong Buy.
These few parameters have narrowed down the universe of more than 7,196 stocks to only 15.
Here are four of the 15 stocks that qualified the screen:
Balchem Corporation ( BCPC Quick Quote BCPC - Free Report) is a provider of state-of-the-art solutions and the finest quality products for a range of industries worldwide. Its 12-month net profit margin is 12%. Civista Bancshares, Inc. ( CIVB Quick Quote CIVB - Free Report) is a financial holding company for Civista Bank. Its 12-month net profit margin is 25.1%. H.B. Fuller Company ( FUL Quick Quote FUL - Free Report) is a manufacturer of adhesives, sealants, coatings, polymers, tapes, encapsulants, additives, and other specialty chemical products. Its 12-month net profit margin is 5%. Nexstar Media Group, Inc. ( NXST Quick Quote NXST - Free Report) owns, operates, programs or provides sales and other services to television stations in the states of Illinois, Indiana, Maryland, Missouri, Montana, Texas, Pennsylvania, Louisiana, Arkansas, Alabama and New York. Its 12-month net profit margin is 18%.
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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 .