We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
5 Stocks With Solid Net Profit Margin to Enrich Your Portfolio
Read MoreHide Full Article
Net profit, also referred to as the bottom line, is one of the key tools that determines the financial health of an enterprise. The metric demonstrates a company’s ability to convert per dollar sales into profits.
A low-profit margin indicates higher risks, implying that a revenue drop might dampen profits, pushing the company in the red. TimkenSteel , One Stop Systems (OSS - Free Report) , Fidelity National Title Group (FNF - Free Report) , Citi Trends (CTRN - Free Report) and ModivCare (MODV - Free Report) boasts solid net profit margins.
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 businessvalue.
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 we discuss our five picks from the 42 stocks that qualified the screen:
TimkenSteel engages in manufacturing alloy steel, as well as carbon and micro-alloy steel. The company currently sports a Zacks Rank of 1 and has a VGM Score of A.
The Zacks Consensus Estimate for TimkenSteel’s 2021 earnings has been revised upward to $3.03 from $2.42 in the past 60 days. TMST has surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 59.2%.
One Stop Systems designs and manufactures ultra-dense high-performance computing systems for learning, oil and gas exploration, financial trading, media and entertainment, defense and traditional HPC applications. One Stop Systems currently sports a Zacks Rank #1 and has a VGM Score of A.
The Zacks Consensus Estimate of 22 cents for One Stop Systems’ current-year earnings has moved a penny north in the past seven days. OSS has surpassed the Zacks Consensus Estimate twice in the trailing four quarters while matches the same once and missed on one occasion, the average positive surprise being 100%.
Fidelity National Title Group is a leading provider of title insurance, specialty insurance and claims management services. The company sports a Zacks Rank of 1, at present, and has a VGM Score of A.
The Zacks Consensus Estimate for Fidelity National Title Group’s 2021 earnings has been revised upward to $7.29 from $6.87 in 60 days. FNF has surpassed the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 38.2%.
Citi Trends is a value-priced retailer of urban fashion apparel and accessories for the entire family. The company currently flaunts a Zacks Rank of 1 and has a VGM Score of A.
The Zacks Consensus Estimate for Citi Trends’ fiscal 2022 earnings has moved up to $7.12 from $6.50 in the past 30 days. CTRN has surpassed the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 79.5%.
ModivCare is a technology-enabled healthcare services company. It provides a suite of integrated supportive care solutions for public and private players and their patients. The company currently sports a Zacks Rank of 1 and has a VGM Score of B.
The Zacks Consensus Estimate for ModivCare’s 2021 earnings has been revised upward to $7.53 from $6.41 in the past 30 days. MODV has surpassed the Zacks Consensus Estimate in three out of the trailing four quarters while missing the same on one occasion, the average surprise being 12.3%.
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.
Image: Shutterstock
5 Stocks With Solid Net Profit Margin to Enrich Your Portfolio
Net profit, also referred to as the bottom line, is one of the key tools that determines the financial health of an enterprise. The metric demonstrates a company’s ability to convert per dollar sales into profits.
A low-profit margin indicates higher risks, implying that a revenue drop might dampen profits, pushing the company in the red. TimkenSteel , One Stop Systems (OSS - Free Report) , Fidelity National Title Group (FNF - Free Report) , Citi Trends (CTRN - Free Report) and ModivCare (MODV - Free Report) boasts solid net profit margins.
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 businessvalue.
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 we discuss our five picks from the 42 stocks that qualified the screen:
TimkenSteel engages in manufacturing alloy steel, as well as carbon and micro-alloy steel. The company currently sports a Zacks Rank of 1 and has a VGM Score of A.
The Zacks Consensus Estimate for TimkenSteel’s 2021 earnings has been revised upward to $3.03 from $2.42 in the past 60 days. TMST has surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 59.2%.
One Stop Systems designs and manufactures ultra-dense high-performance computing systems for learning, oil and gas exploration, financial trading, media and entertainment, defense and traditional HPC applications. One Stop Systems currently sports a Zacks Rank #1 and has a VGM Score of A.
The Zacks Consensus Estimate of 22 cents for One Stop Systems’ current-year earnings has moved a penny north in the past seven days. OSS has surpassed the Zacks Consensus Estimate twice in the trailing four quarters while matches the same once and missed on one occasion, the average positive surprise being 100%.
Fidelity National Title Group is a leading provider of title insurance, specialty insurance and claims management services. The company sports a Zacks Rank of 1, at present, and has a VGM Score of A.
The Zacks Consensus Estimate for Fidelity National Title Group’s 2021 earnings has been revised upward to $7.29 from $6.87 in 60 days. FNF has surpassed the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 38.2%.
Citi Trends is a value-priced retailer of urban fashion apparel and accessories for the entire family. The company currently flaunts a Zacks Rank of 1 and has a VGM Score of A.
The Zacks Consensus Estimate for Citi Trends’ fiscal 2022 earnings has moved up to $7.12 from $6.50 in the past 30 days. CTRN has surpassed the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 79.5%.
ModivCare is a technology-enabled healthcare services company. It provides a suite of integrated supportive care solutions for public and private players and their patients. The company currently sports a Zacks Rank of 1 and has a VGM Score of B.
The Zacks Consensus Estimate for ModivCare’s 2021 earnings has been revised upward to $7.53 from $6.41 in the past 30 days. MODV has surpassed the Zacks Consensus Estimate in three out of the trailing four quarters while missing the same on one occasion, the average surprise being 12.3%.
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/.