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.
These 4 Solid Net Profit Margin Stocks Have Winning Potential
Read MoreHide Full Article
Investors eye businesses that generate profits on a regular basis. In order to gauge the extent of profits, there is no better metric than net profit margin.
A higher net margin underlines a company’s efficiency in translating sales into actual profits. Moreover, this metric lends an insight into how well a company is run and the headwinds weighing on it. International Game Technology (IGT - Free Report) , Encore Wire (WIRE - Free Report) , CONSOL Energy Inc. (CEIX - Free Report) and Tecnoglass, Inc. (TGLS - Free Report) boast 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, the 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 attracts investors and draws well-skilled employees, who eventually enhance business value.
Moreover, a higher net profit margin compared with its peers provides the company with 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 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 environments. 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 four picks from the 51 stocks that qualified the screen:
International Game Technology, a gaming company, is engaged in the design, development, manufacture and marketing of casino-style gaming equipment, systems technology, and game content. Its business segment consists of North America and International. International Game Technology sports a Zacks Rank of 1, at present, and has a VGM Score of A.
The Zacks Consensus Estimate for International Game Technology’s 2022 earnings has been revised upward by a penny to 84 cents per share in the past seven days. IGT surpassed the Zacks Consensus Estimate thrice in the trailing four quarters while missing the same on one occasion, the average surprise being 115.8%.
Encore Wire is a low-cost manufacturer of copper electrical building wire and cable. The company is a significant supplier of both residential wire for interior electrical wiring in homes, apartments and manufactured housing, as well as building wire for electrical distribution in commercial and industrial buildings. The company currently sports a Zacks Rank of 1 and has a VGM Score of A.
The Zacks Consensus Estimate for Encore Wire’s 2022 earnings has been revised upward to $33.35 per share from $26.86 in the past 30 days. WIRE surpassed the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 173.4%.
CONSOL Energy is a producer and exporter of high-Btu bituminous thermal and crossover metallurgical coal. It owns and operates productive longwall mining operations, primarily in the Northern Appalachian Basin. The company currently carries a Zacks Rank of 1 and has a VGM Score of B.
The Zacks Consensus Estimate for CONSOL Energy’s 2022 earnings has been revised upward to $11.05 per share from $9.72 in the past seven days. CEIX surpassed the Zacks Consensus Estimate thrice in the trailing four quarters while missing the same on one occasion, the average surprise being 34.9%.
Tecnoglass is engaged in manufacturing and selling architectural glass and windows and aluminum products for the residential and commercial construction industries. The company currently sports a Zacks Rank of 1 and has a VGM Score of A.
The Zacks Consensus Estimate for Tecnoglass’ 2022 earnings has been revised upward by 19.5% to $3.07 per share in the past seven days. TGLS surpassed the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 26.91%.
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 backtesting 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: Bigstock
These 4 Solid Net Profit Margin Stocks Have Winning Potential
Investors eye businesses that generate profits on a regular basis. In order to gauge the extent of profits, there is no better metric than net profit margin.
A higher net margin underlines a company’s efficiency in translating sales into actual profits. Moreover, this metric lends an insight into how well a company is run and the headwinds weighing on it. International Game Technology (IGT - Free Report) , Encore Wire (WIRE - Free Report) , CONSOL Energy Inc. (CEIX - Free Report) and Tecnoglass, Inc. (TGLS - Free Report) boast 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, the 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 attracts investors and draws well-skilled employees, who eventually enhance business value.
Moreover, a higher net profit margin compared with its peers provides the company with 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 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 environments. 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 four picks from the 51 stocks that qualified the screen:
International Game Technology, a gaming company, is engaged in the design, development, manufacture and marketing of casino-style gaming equipment, systems technology, and game content. Its business segment consists of North America and International. International Game Technology sports a Zacks Rank of 1, at present, and has a VGM Score of A.
The Zacks Consensus Estimate for International Game Technology’s 2022 earnings has been revised upward by a penny to 84 cents per share in the past seven days. IGT surpassed the Zacks Consensus Estimate thrice in the trailing four quarters while missing the same on one occasion, the average surprise being 115.8%.
Encore Wire is a low-cost manufacturer of copper electrical building wire and cable. The company is a significant supplier of both residential wire for interior electrical wiring in homes, apartments and manufactured housing, as well as building wire for electrical distribution in commercial and industrial buildings. The company currently sports a Zacks Rank of 1 and has a VGM Score of A.
The Zacks Consensus Estimate for Encore Wire’s 2022 earnings has been revised upward to $33.35 per share from $26.86 in the past 30 days. WIRE surpassed the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 173.4%.
CONSOL Energy is a producer and exporter of high-Btu bituminous thermal and crossover metallurgical coal. It owns and operates productive longwall mining operations, primarily in the Northern Appalachian Basin. The company currently carries a Zacks Rank of 1 and has a VGM Score of B.
The Zacks Consensus Estimate for CONSOL Energy’s 2022 earnings has been revised upward to $11.05 per share from $9.72 in the past seven days. CEIX surpassed the Zacks Consensus Estimate thrice in the trailing four quarters while missing the same on one occasion, the average surprise being 34.9%.
Tecnoglass is engaged in manufacturing and selling architectural glass and windows and aluminum products for the residential and commercial construction industries. The company currently sports a Zacks Rank of 1 and has a VGM Score of A.
The Zacks Consensus Estimate for Tecnoglass’ 2022 earnings has been revised upward by 19.5% to $3.07 per share in the past seven days. TGLS surpassed the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 26.91%.
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 backtesting 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/.