For Immediate Release
Chicago, IL – April 26, 2023 – Stocks in this week’s article are The Andersons, Inc. (
ANDE Quick Quote ANDE - Free Report) , Alpha Metallurgical Resources Inc. ( AMR Quick Quote AMR - Free Report) , Veritiv Corp. ( VRTV Quick Quote VRTV - Free Report) and Arcos Dorados Holdings ( ARCO Quick Quote ARCO - Free Report) . Add 4 Stocks with Solid Net Profit Margins for Higher Returns
Net profit, also referred to as the bottom line, is one of the key tools determining the financial health of an enterprise. The metric demonstrates a company’s ability to convert per dollar sales into profits.
A low-profit margin indicates higher risks, implying that a revenue drop might dampen profits, thus pushing a company into the red.
The Andersons, Inc., Alpha Metallurgical Resources Inc., Veritiv Corp. and Arcos Dorados Holdings, however, 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 business value.
Moreover, a higher net profit margin compared with its peers provides the company 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.
Here we discuss our four picks from the 28 stocks that qualified the screen:
Andersons is a regional grain merchandiser with diversified businesses in agriculture, plant nutrient formulation and distribution, turf product production, railcar marketing and general merchandise retailing that generate revenues. The company maintains grain and production facilities throughout the Midwest and six retail locations in northern and central Ohio. The stock sports a Zacks Rank #1 and has a VGM Score of A.
The Zacks Consensus Estimate of $2.94 for Andersons’ current-year earnings has moved 26.2% north in the past 60 days. ANDE surpassed the Zacks Consensus Estimate thrice in the trailing four quarters while missing the same on one occasion, the average surprise being 60.3%.
Alpha Metallurgical is a mining company with operations principally in Virginia and West Virginia. The company supplies metallurgical products to the steel industry. The company currently sports a Zacks Rank of 1 and has a VGM Score of A.
The Zacks Consensus Estimate for Alpha Metallurgical’s 2023 earnings has moved upward to $46.09 per share from $42.55 60 days ago. AMR missed the Zacks Consensus Estimate thrice in the trailing four quarters while surpassing the same on one occasion, the average negative surprise being 5.3%.
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. The company's customers vary across a number of industries, including manufacturing, healthcare, retail and more. The company sports a Zacks Rank #1 at present and has a VGM Score of A.
The Zacks Consensus Estimate for Veritiv’s 2023 earnings has been revised upward by 15 cents to $19.50 per share in the past seven days. VRTV surpassed the Zacks Consensus Estimate thrice in the trailing four quarters while missing the same on one occasion, the average surprise being 20.7%.
Arcos Dorados operates as a franchisee of McDonald's, with its operations divided in Brazil, the North Latin America division, South Latin America and the Caribbean division. It also runs quick-service restaurants in Latin America and the Caribbean. The company currently sports a Zacks Rank of 1 and has a VGM Score of A.
The Zacks Consensus Estimate for Arcos Dorados’ 2023 earnings has been revised upward by a couple of cents to 68 cents per share in the past 30 days. ARCO surpassed the Zacks Consensus Estimate thrice in the trailing four quarters while missing the same on one occasion, the average surprise being 46%.
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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 For the rest of this Screen of the Week article please visit Zacks.com at: https://www.zacks.com/stock/news/2083962/add-4-stocks-with-solid-net-profit-margin-for-higher-returns 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. About Screen of the Week
Zacks.com created the first and best screening system on the web earning the distinction as the "#1 site for screening stocks" by Money Magazine. But powerful screening tools is just the start. That is why Zacks created the Screen of the Week to highlight profitable stock picking strategies that investors can actively use.
Strong Stocks that Should Be in the News
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Contact: Jim Giaquinto
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