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Bet on These 4 Top-Ranked Stocks With Solid Net Profit Margin
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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. Limbach Holdings Inc. (LMB - Free Report) , H&E Equipment Services, Inc. (HEES - Free Report) , Huron Consulting Group Inc. (HURN - Free Report) and EMCOR Group, Inc. (EME - 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 34 stocks that qualified the screening:
Limbach provides building systems. The company engineers, constructs and services the mechanical, plumbing, air conditioning, heating, building automation, electrical and control systems. At present, the stock sports a Zacks Rank #1 and has a VGM Score of A.
The Zacks Consensus Estimate for Limbach’s current-year earnings has moved up to $1.75 per share from $1.36 per share 30 days ago. LMB surpassed the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 92.1%.
H&E Equipment is one of the largest integrated equipment services companies in the United States, with full-service facilities throughout the Intermountain, Southwest, Gulf Coast & Southeast regions of the United States. The stock sports a Zacks Rank #1 and has a VGM Score of A.
The Zacks Consensus Estimate of $4.50 per share for H&E Equipment’s 2023 earnings has moved 4.2% north in the past 30 days. HEES surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 21.4%.
Huron Consulting is an independent provider of financial and operational consulting services. Huron's experienced and credentialed professionals employ their expertise in accounting, finance, economics and operations to a wide variety of both financially sound and distressed organizations, including Fortune 500 companies, medium-sized businesses, leading academic institutions, healthcare organizations and the law firms that represent these various organizations. At present, the stock flaunts a Zacks Rank #1 and has a VGM Score of B.
The Zacks Consensus Estimate for Huron Consulting’s current-year earnings has moved up by 15 cents to $4.67 per share in the past 30 days. HURN surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 25.7%.
EMCOR is one of the leading providers of mechanical and electrical construction, industrial and energy infrastructure, as well as building services for a diverse range of businesses. The company serves commercial, industrial, utility and institutional clients. At present, the stock sports a Zacks Rank #1 and has a VGM Score of A.
The Zacks Consensus Estimate for EMCOR’s current-year earnings has moved up to $12.38 per share from $10.97 per share 30 days ago. EME surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 25%.
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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Bet on These 4 Top-Ranked Stocks With Solid Net Profit Margin
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. Limbach Holdings Inc. (LMB - Free Report) , H&E Equipment Services, Inc. (HEES - Free Report) , Huron Consulting Group Inc. (HURN - Free Report) and EMCOR Group, Inc. (EME - 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 34 stocks that qualified the screening:
Limbach provides building systems. The company engineers, constructs and services the mechanical, plumbing, air conditioning, heating, building automation, electrical and control systems. At present, the stock sports a Zacks Rank #1 and has a VGM Score of A.
The Zacks Consensus Estimate for Limbach’s current-year earnings has moved up to $1.75 per share from $1.36 per share 30 days ago. LMB surpassed the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 92.1%.
H&E Equipment is one of the largest integrated equipment services companies in the United States, with full-service facilities throughout the Intermountain, Southwest, Gulf Coast & Southeast regions of the United States. The stock sports a Zacks Rank #1 and has a VGM Score of A.
The Zacks Consensus Estimate of $4.50 per share for H&E Equipment’s 2023 earnings has moved 4.2% north in the past 30 days. HEES surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 21.4%.
Huron Consulting is an independent provider of financial and operational consulting services. Huron's experienced and credentialed professionals employ their expertise in accounting, finance, economics and operations to a wide variety of both financially sound and distressed organizations, including Fortune 500 companies, medium-sized businesses, leading academic institutions, healthcare organizations and the law firms that represent these various organizations. At present, the stock flaunts a Zacks Rank #1 and has a VGM Score of B.
The Zacks Consensus Estimate for Huron Consulting’s current-year earnings has moved up by 15 cents to $4.67 per share in the past 30 days. HURN surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 25.7%.
EMCOR is one of the leading providers of mechanical and electrical construction, industrial and energy infrastructure, as well as building services for a diverse range of businesses. The company serves commercial, industrial, utility and institutional clients. At present, the stock sports a Zacks Rank #1 and has a VGM Score of A.
The Zacks Consensus Estimate for EMCOR’s current-year earnings has moved up to $12.38 per share from $10.97 per share 30 days ago. EME surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 25%.
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/.