Profitability analysis is considered one of the best possible ways to assess the prospects of a company. This analysis is used to identify a profitable company from a loss-making one. In this context, it can be inferred that a profitable company generally has a high level of sales surplus, which will help it meet all its operating and non-operating costs and still offer high returns.
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 as it is the most useful and simplest.
To that end, Fulgent Genetics, Inc. (
FLGT Quick Quote FLGT - Free Report) , Atlas Air Worldwide Holdings, Inc. , Build-A-Bear Workshop, Inc. ( BBW Quick Quote BBW - Free Report) , and Quidel Corporation ( QDEL Quick Quote QDEL - Free Report) have been selected as the top picks. 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 find out a company’s profit-generating abilities. But net income ratio is widely accepted as the most conservative of the above-mentioned ratios.
Net income, in simple words, is the total earnings of a company 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 is able to effectively manage all its 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 7,843 stocks to only 12.
Here are four of the 12 stocks that qualified the screening:
Fulgent Genetics, Inc. is a provider of COVID-19 testing and genetic testing services to physicians with clinically actionable diagnostic information.
Fulgent’s technology platform integrates data comparison and suppression algorithms, adaptive learning software, advanced genetic diagnostics tools and integrated laboratory process, which it serves primarily to hospitals and medical institutions. Its 12-month net profit margin is 55%.
Atlas Air Worldwide Holdings, Inc. is a provider of outsourced aircraft and aviation operating services.
AAWW is principally involved in the airport-to-airport air transportation of heavy freight cargo through its two operating subsidiary airlines, Atlas Air, Inc. and Polar Air Cargo, Inc. The 12-month net profit margin of Atlas Air is 13.2%.
Build-A-Bear Workshop , Inc. is a retailer of plush animals and related products. BBW provides a make your own stuffed animal interactive retail-entertainment experience.
Build-A-Bear Workshop has a 12-month net profit margin is 8.5%.
Quidel Corporation is a developer and manufacturer of point-of-care, rapid diagnostic tests for detection of medical conditions and illnesses.
Quidel has a12-month net profit margin of 47.2%.
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