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4 Stocks With Solid Net Profit Margin to Boost Your Portfolio
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Investors prefer to put their money in businesses that reap 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 reflects a company’s efficiency in converting sales into actual profits. OneSpaWorld Holding (OSW - Free Report) , Hudson Technologies (HDSN - Free Report) , International Game Technology (IGT - Free Report) and Build-A-Bear Workshop (BBW - 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 not only attracts investors but also draws well-skilled employees who eventually enhance a business's 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 40 stocks that qualified the screen:
OneSpaWorld is a provider and innovator in the fields of wellness, beauty, rejuvenation, and transformation on cruise ships and on land. The company's service includes traditional and alternative massage, body and skincare treatment options, ayurvedic treatments, comprehensive hair and nail services, fitness, acupuncture, herbal medicine, pain management and medi-spa. The stock sports a Zacks Rank #1 and has a VGM Score of B.
The Zacks Consensus Estimate of 23 cents for OneSpaWorld’s current-year earnings has moved 91.7% north in the past 60 days. OSW surpassed the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 84.2%.
Hudson Technologies is a leading provider of innovative solutions to recurring problems within the refrigeration industry. At present, the stock sports a Zacks Rank #1 and has a VGM Score of B.
The Zacks Consensus Estimate of $2.16 for Hudson Technologies’ current-year earnings has moved 37 cents north in the past 60 days. HDSN surpassed the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 297%.
International Game Technology is a gaming company. The company is engaged in design, development, manufacture and marketing of casino-style gaming equipment, systems technology, and game content. The company sports a Zacks Rank of 1 at present and has a VGM Score of B.
The Zacks Consensus Estimate for International Game Technology’s 2022 earnings has been revised upward to $1.90 per share from 83 cents in the past 60 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%.
Build-A-Bear Workshop is the leading and only national company, providing a make-your-own stuffed animal interactive retail-entertainment experience. BBW stock currently sports a Zacks Rank #1 and has a VGM Score of B.
The Zacks Consensus Estimate for Build-A-Bear Workshop’s fiscal 2023 earnings has been revised upward to $2.88 per share from $2.76 in the past 30 days. BBW surpassed the Zacks Consensus Estimate thrice in the trailing four quarters while missing the same on one occasion, the average surprise being 14.7%.
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.
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4 Stocks With Solid Net Profit Margin to Boost Your Portfolio
Investors prefer to put their money in businesses that reap 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 reflects a company’s efficiency in converting sales into actual profits. OneSpaWorld Holding (OSW - Free Report) , Hudson Technologies (HDSN - Free Report) , International Game Technology (IGT - Free Report) and Build-A-Bear Workshop (BBW - 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 not only attracts investors but also draws well-skilled employees who eventually enhance a business's 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 40 stocks that qualified the screen:
OneSpaWorld is a provider and innovator in the fields of wellness, beauty, rejuvenation, and transformation on cruise ships and on land. The company's service includes traditional and alternative massage, body and skincare treatment options, ayurvedic treatments, comprehensive hair and nail services, fitness, acupuncture, herbal medicine, pain management and medi-spa. The stock sports a Zacks Rank #1 and has a VGM Score of B.
The Zacks Consensus Estimate of 23 cents for OneSpaWorld’s current-year earnings has moved 91.7% north in the past 60 days. OSW surpassed the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 84.2%.
Hudson Technologies is a leading provider of innovative solutions to recurring problems within the refrigeration industry. At present, the stock sports a Zacks Rank #1 and has a VGM Score of B.
The Zacks Consensus Estimate of $2.16 for Hudson Technologies’ current-year earnings has moved 37 cents north in the past 60 days. HDSN surpassed the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 297%.
International Game Technology is a gaming company. The company is engaged in design, development, manufacture and marketing of casino-style gaming equipment, systems technology, and game content. The company sports a Zacks Rank of 1 at present and has a VGM Score of B.
The Zacks Consensus Estimate for International Game Technology’s 2022 earnings has been revised upward to $1.90 per share from 83 cents in the past 60 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%.
Build-A-Bear Workshop is the leading and only national company, providing a make-your-own stuffed animal interactive retail-entertainment experience. BBW stock currently sports a Zacks Rank #1 and has a VGM Score of B.
The Zacks Consensus Estimate for Build-A-Bear Workshop’s fiscal 2023 earnings has been revised upward to $2.88 per share from $2.76 in the past 30 days. BBW surpassed the Zacks Consensus Estimate thrice in the trailing four quarters while missing the same on one occasion, the average surprise being 14.7%.
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/.