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4 Solid Net Profit Margin Stocks to Boost 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 insight into how well a company is run and the headwinds weighing on it. InterDigital, Ardmore Shipping Corp., Inspired Entertainment and Global Ship Lease 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.
Here we discuss our four picks from the 40 stocks that qualified the screen:
InterDigital is a pioneer in advanced mobile technologies that enables wireless communications and capabilities. The company designs and develops a wide range of advanced technology solutions, which are used in digital cellular and wireless 3G, 4G and IEEE 802-related products and networks. The stock sports a Zacks Rank of 1 at present and has a VGM Score of A.
The Zacks Consensus Estimate for InterDigital’s 2023 earnings has been revised upward by 118% to $6.04 per share in the past 30 days. IDCC surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 170.9%.
Ardmore Shipping engages in the ownership and operation of product and chemical tankers. It provides shipping services to customers through voyage charters, commercial pools and time charters. The company provides seaborne transportation of petroleum products and chemicals worldwide to oil majors, national oil companies, oil and chemical traders, and chemical companies. It currently sports a Zacks Rank of 1 and has a VGM Score of A.
The Zacks Consensus Estimate for Ardmore Shipping’s 2023 earnings has been increased 31 cents to $2.79 per share in the past 30 days. ASC surpassed the Zacks Consensus Estimate thrice in the trailing four quarters while matching the same on one occasion, the average surprise being 3.5%.
Inspired Entertainment is a games technology company. It supplies Virtual Sports, Mobile Gaming and Server-Based Gaming systems to regulated lottery, betting and gaming operators. The company currently sports a Zacks Rank #1 and has a VGM Score of A.
The Zacks Consensus Estimate for INSE’s 2023 earnings has been revised upward to $1.10 per share from 96 cents in the past 30 days. Inspired Entertainment surpassed the Zacks Consensus Estimate thrice in the trailing four quarters while missing the same on one occasion, the average surprise being 28%.
Global Ship Lease is a rapidly growing containership charter owner. Incorporated in the Marshall Islands, Global Ship Lease commenced operations in December 2007 with a business of owning and chartering out containerships under long-term, fixed-rate charters to world-class container liner companies. The company sports a Zacks Rank of 1 at present and has a VGM Score of B.
The Zacks Consensus Estimate for Global Ship Lease’s 2023 earnings has been revised upward by 36 cents to $8.87 per share in the past 30 days. GSL surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 15.6%.
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.
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
Many are little publicized and fly under the Wall Street radar. They're virtually unknown to the general public. Yet today's 220 Zacks Rank #1 "Strong Buys" were generated by the stock-picking system that has more than doubled the market from 1988 through 2016. Its average gain has been a stellar +25% per year.
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer. Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
See More Zacks Research for These Tickers
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Zacks.com featured highlights InterDigital, Ardmore Shipping, Inspired Entertainment and Global Ship Lease
For Immediate Release
Chicago, IL – May 26, 2023 – Stocks in this week’s article are InterDigital (IDCC - Free Report) , Ardmore Shipping Corp. (ASC - Free Report) , Inspired Entertainment (INSE - Free Report) and Global Ship Lease (GSL - Free Report) .
4 Solid Net Profit Margin Stocks to Boost 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 insight into how well a company is run and the headwinds weighing on it. InterDigital, Ardmore Shipping Corp., Inspired Entertainment and Global Ship Lease 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.
Here we discuss our four picks from the 40 stocks that qualified the screen:
InterDigital is a pioneer in advanced mobile technologies that enables wireless communications and capabilities. The company designs and develops a wide range of advanced technology solutions, which are used in digital cellular and wireless 3G, 4G and IEEE 802-related products and networks. The stock sports a Zacks Rank of 1 at present and has a VGM Score of A.
The Zacks Consensus Estimate for InterDigital’s 2023 earnings has been revised upward by 118% to $6.04 per share in the past 30 days. IDCC surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 170.9%.
Ardmore Shipping engages in the ownership and operation of product and chemical tankers. It provides shipping services to customers through voyage charters, commercial pools and time charters. The company provides seaborne transportation of petroleum products and chemicals worldwide to oil majors, national oil companies, oil and chemical traders, and chemical companies. It currently sports a Zacks Rank of 1 and has a VGM Score of A.
The Zacks Consensus Estimate for Ardmore Shipping’s 2023 earnings has been increased 31 cents to $2.79 per share in the past 30 days. ASC surpassed the Zacks Consensus Estimate thrice in the trailing four quarters while matching the same on one occasion, the average surprise being 3.5%.
Inspired Entertainment is a games technology company. It supplies Virtual Sports, Mobile Gaming and Server-Based Gaming systems to regulated lottery, betting and gaming operators. The company currently sports a Zacks Rank #1 and has a VGM Score of A.
The Zacks Consensus Estimate for INSE’s 2023 earnings has been revised upward to $1.10 per share from 96 cents in the past 30 days. Inspired Entertainment surpassed the Zacks Consensus Estimate thrice in the trailing four quarters while missing the same on one occasion, the average surprise being 28%.
Global Ship Lease is a rapidly growing containership charter owner. Incorporated in the Marshall Islands, Global Ship Lease commenced operations in December 2007 with a business of owning and chartering out containerships under long-term, fixed-rate charters to world-class container liner companies. The company sports a Zacks Rank of 1 at present and has a VGM Score of B.
The Zacks Consensus Estimate for Global Ship Lease’s 2023 earnings has been revised upward by 36 cents to $8.87 per share in the past 30 days. GSL surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 15.6%.
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.
For the rest of this Screen of the Week article please visit Zacks.com at: https://www.zacks.com/stock/news/2099477/4-solid-net-profit-margin-stocks-to-boost-portfolio-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
Many are little publicized and fly under the Wall Street radar. They're virtually unknown to the general public. Yet today's 220 Zacks Rank #1 "Strong Buys" were generated by the stock-picking system that has more than doubled the market from 1988 through 2016. Its average gain has been a stellar +25% per year.
Get it free >>
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Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer. Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.