Smart investors always look for a profitable company over a loss-making one. Thus, they aim for companies that offer sturdy returns to investors even after meeting all 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.
To that end, Boot Barn (
BOOT Quick Quote BOOT - Free Report) , Nova Measuring Instruments ( NVMI Quick Quote NVMI - Free Report) and Vaalco Energy ( EGY Quick Quote EGY - Free Report) have been selected as the top picks with a high net income ratio. 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 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 13.
Here are three of the 13 stocks that qualified the screening:
Boot Barn operates as a lifestyle retail chain devoted to western and work-related footwear, apparel and accessories. The 12-month net profit margin of BOOT is 12.9%. Nova Measuring Instruments is a provider of metrology solutions for advanced process control used in semiconductor manufacturing. The 12-month net profit margin of NVMI is 12.9%. Vaalco Energy is an independent energy company principally engaged in the acquisition, exploration, development and production of crude oil and natural gas. The 12-month net profit margin of EGY is 36.9%.
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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.