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4 Solid Net Profit Margin Stocks to Maximize Portfolio Returns
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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. StoneX Group (SNEX - Free Report) , Harte Hanks (HHS - Free Report) , Veritiv and AMN Healthcare Services (AMN - 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 33 stocks that qualified the screen:
StoneX Group, formerly known as INTL FCStone Inc., provides financial services. The company, through its subsidiaries, offers execution, post-trade settlement, clearing and custody services. StoneX Group sports a Zacks Rank of 1, at present, and has a VGM Score of A.
The Zacks Consensus Estimate for StoneX Group’s fiscal 2023 earnings has been revised upward by 36 cents to $9.07 per share in the past seven days. SNEX surpassed the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 58.2%.
Harte Hanks is a data-driven, omnichannel marketing company. The company offers customer data landscape as well as the executional know-how in database build and management, data analytics, data-driven creativity, digital media, direct mail, customer contact, client fulfillment and marketing and product logistics. The company currently sports a Zacks Rank of 1 and has a VGM Score of A.
The Zacks Consensus Estimate for Harte Hanks’ 2023 earnings has been revised upward by 5 cents to $1.80 per share in the past 60 days. HHS surpassed the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 219.8%.
Veritiv engages in offering North American business-to-business distribution solutions. It provides packaging, print and print management, publishing, supply chain, facility and logistics solutions that span the entire lifecycle of core business operations. At present, the stock sports a Zacks Rank #1 and has a VGM Score of B.
The Zacks Consensus Estimate for VRTV’s 2023 earnings has been revised upward to $16.80 per share from $16.15 in the past 30 days. Veritiv surpassed the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 31.3 %.
AMN Healthcare is a travel healthcare staffing company. Its business has evolved beyond traditional healthcare staffing and recruitment services, making it a strategic total talent solutions partner for its clients. The company currently carries a Zacks Rank of 2 and has a VGM Score of A.
The Zacks Consensus Estimate for AMN Healthcare’s 2023 earnings has been revised upward by a penny to $8.44 per share in the past seven days. AMN surpassed the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 11%.
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.
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4 Solid Net Profit Margin Stocks to Maximize Portfolio Returns
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. StoneX Group (SNEX - Free Report) , Harte Hanks (HHS - Free Report) , Veritiv and AMN Healthcare Services (AMN - 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 33 stocks that qualified the screen:
StoneX Group, formerly known as INTL FCStone Inc., provides financial services. The company, through its subsidiaries, offers execution, post-trade settlement, clearing and custody services. StoneX Group sports a Zacks Rank of 1, at present, and has a VGM Score of A.
The Zacks Consensus Estimate for StoneX Group’s fiscal 2023 earnings has been revised upward by 36 cents to $9.07 per share in the past seven days. SNEX surpassed the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 58.2%.
Harte Hanks is a data-driven, omnichannel marketing company. The company offers customer data landscape as well as the executional know-how in database build and management, data analytics, data-driven creativity, digital media, direct mail, customer contact, client fulfillment and marketing and product logistics. The company currently sports a Zacks Rank of 1 and has a VGM Score of A.
The Zacks Consensus Estimate for Harte Hanks’ 2023 earnings has been revised upward by 5 cents to $1.80 per share in the past 60 days. HHS surpassed the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 219.8%.
Veritiv engages in offering North American business-to-business distribution solutions. It provides packaging, print and print management, publishing, supply chain, facility and logistics solutions that span the entire lifecycle of core business operations. At present, the stock sports a Zacks Rank #1 and has a VGM Score of B.
The Zacks Consensus Estimate for VRTV’s 2023 earnings has been revised upward to $16.80 per share from $16.15 in the past 30 days. Veritiv surpassed the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 31.3 %.
AMN Healthcare is a travel healthcare staffing company. Its business has evolved beyond traditional healthcare staffing and recruitment services, making it a strategic total talent solutions partner for its clients. The company currently carries a Zacks Rank of 2 and has a VGM Score of A.
The Zacks Consensus Estimate for AMN Healthcare’s 2023 earnings has been revised upward by a penny to $8.44 per share in the past seven days. AMN surpassed the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 11%.
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/.