Profitability analysis is one of the best ways to evaluate a company's prospects. It is used in detecting a profitable company over a loss-making one. A company with a high level of sales surplus can not only meet all its operating and non-operating costs but also make more profits.
In this context, it may be wise to invest in shares of a company with a high level of profitability as it normally ensures high returns. As a result, the simplest and most transparent way of checking a company’s profitability is by using accounting ratios. There are a variety of profitability ratios, from which we have selected net income ratio here as it is the most useful and simplest profitability metric.
To that end,
Atlas Air Worldwide Holdings, Inc. ( AAWW Quick Quote AAWW - Free Report) , Textainer Group Holdings Limited ( TGH Quick Quote TGH - Free Report) , Churchill Downs Incorporated ( CHDN Quick Quote CHDN - Free Report) and Louisiana-Pacific Corporation ( LPX Quick Quote LPX - Free Report) have been selected as the top picks with a high net income ratio. Net Income Ratio
There are a variety of profit ratios like gross income ratio, operating income ratio, pretax profit margin and net income ratio, which can be used to determine a company’s profit-generating abilities. But net income ratio is widely accepted as the most conservative of the ratios mentioned above.
Net income, in simple words, is the total earnings a company makes after deducting all the expenses from its sales revenue. Net income ratio or net profit margin is a ratio of a company’s net income and sales revenue. A high net income ratio shows that the company can effectively manage all business activities, including production, administration, selling, etc.
Net income ratio is not the only indicator of future winners. So, we have added a few more criteria to arrive at a winning strategy.
Zacks Rank Equal to #1: 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 7,685 stocks to only 15.
Here are four of the 15 stocks that qualified the screening:
Atlas Air Worldwide is the parent company of Atlas Air and Polar Air Cargo, which together operate a fleet of freighter aircraft. Atlas Air Worldwideis principally involved in the airport-to-airport air transportation of heavy freight.
Through its principal subsidiaries, Atlas Air Worldwide offers scheduled air cargo service, cargo charters, military charters, and ACMI aircraft leasing in which customers receive a dedicated aircraft, crew, maintenance and insurance on a long-term lease basis. The 12-month net profit margin of AAWW is 13.2%.
Textainer Group Holdings is a lessor of intermodal containers with a total fleet of more than 1.3 million containers, representing over 2,000,000 TEU. TGH leases containers to more than 400 shipping lines and other lessees, including each of the world's top 20 container lines.
Textainer Group is also the primary supplier of leased containers to the U.S. Military. Its 12-month net profit margin is 35.1%.
Churchill Downs is a racing, online wagering, and gaming entertainment company in the United States that operates through three segments: Churchill Downs, Online Wagering and Gaming.
Churchill Downs has conducted Thoroughbred racing and presented America's greatest race, the Kentucky Derby. The 12-month net profit margin of CHDN is 14.8%.
Louisiana-Pacific Corporation is a manufacturer of building materials and engineered wood products in the United States, Canada, Chile and Brazil.
Louisiana-Pacific's products are used by homebuilders as well as light commercial builders. Its 12-month net profit margin is 32.6%.
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