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Buy These 5 Profitable Stocks for Improving Your Returns
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A company having strong profitability means that it is able to generate surplus sales revenue after meeting all its operating and non-operating expenses. However, a profitable company with weak fundamentals might not succeed in generating positive returns all the time.
But, several studies have pointed out that a company with high profitability normally produces higher returns.
We use profitability ratios to measure a company’s profitability position. Although there are a variety of profitability ratios, we have chosen net income ratio for putting together a screen. Net income ratio is the most effective and widely used profitability metric.
Net Income Ratio
Net income ratio reveals the bottom line of a company. It reflects the percentage of net income to total sales revenue. Using net income ratio, one can measure a company’s effectiveness to pay for all its operating and non-operating expenses from sales revenue alone. A higher net income ratio normally implies a company’s ability to generate ample sales revenue and successfully manage all its business functions.
Screening Parameters
Net income ratio is not the only indicator of future winners. As such, we have added a few additional criteria to arrive at a winning strategy.
Zacks Rank equal to #1: Only Strong Buy stocks are allowed. With the Zacks Rank proving itself to be one of the best rating systems out there, this is a great way to start things off.
12-Month Trailing Sales and Net Income Growth Higher than X Industry: Stocks that possess higher sales and net income growth in the last 12 months showcase better financial performance.
12-Month Trailing Net Income Ratio Higher than X Industry: High net income ratio indicates a company’s solid profitability.
% Rating Strong Buy greater than 70%:This indicates that 70% of the analysts covering these stocks are optimistic.
Here are five of the nine stocks that qualified the screening:
Facebook, Inc. operates a social networking website worldwide, where users connect, share and communicate with each other. This Zacks Rank #1 company has an average four-quarter earnings surprise of 18.3%.
AMN Healthcare Services Inc. is a travel healthcare staffing company. This Zacks Rank #1 company has an average four-quarter earnings surprise of 23.6%.
NuVasive, Inc. is a medical device company focused on the design, development and marketing of products for the surgical treatment of spine disorders. This Zacks Rank #1 company has an average four-quarter earnings surprise of 19%.
TRI Pointe Group, Inc. (TPH - Free Report) is engaged in construction, design and sale of single-family homes. This Zacks Rank #1 company has an average four-quarter earnings surprise of 34.6%.
Entegris, Inc. (ENTG - Free Report) is a leading provider of materials management solutions to the microelectronics industry including semiconductor manufacturing and disk manufacturing markets. This Zacks Rank #1 company has an average four-quarter earnings surprise of 20.7%.
While backtesting over a two-year timeframe (July 25, 2014 to July 22, 2016), a portfolio following this strategy provided a total return of 21.7% compared with the S&P 500’s return of 7.8%. Thus, this strategy may prove profitable for those looking to beat the markets.
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.
Zacks Restaurant Recommendations: In addition to dining at these special places, you can feast on their stock shares. A Zacks Special Report spotlights 5 recent IPOs to watch plus 2 stocks that offer immediate promise in a booming sector. Download it free »
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Buy These 5 Profitable Stocks for Improving Your Returns
A company having strong profitability means that it is able to generate surplus sales revenue after meeting all its operating and non-operating expenses. However, a profitable company with weak fundamentals might not succeed in generating positive returns all the time.
But, several studies have pointed out that a company with high profitability normally produces higher returns.
We use profitability ratios to measure a company’s profitability position. Although there are a variety of profitability ratios, we have chosen net income ratio for putting together a screen. Net income ratio is the most effective and widely used profitability metric.
Net Income Ratio
Net income ratio reveals the bottom line of a company. It reflects the percentage of net income to total sales revenue. Using net income ratio, one can measure a company’s effectiveness to pay for all its operating and non-operating expenses from sales revenue alone. A higher net income ratio normally implies a company’s ability to generate ample sales revenue and successfully manage all its business functions.
Screening Parameters
Net income ratio is not the only indicator of future winners. As such, we have added a few additional criteria to arrive at a winning strategy.
Zacks Rank equal to #1: Only Strong Buy stocks are allowed. With the Zacks Rank proving itself to be one of the best rating systems out there, this is a great way to start things off.
12-Month Trailing Sales and Net Income Growth Higher than X Industry: Stocks that possess higher sales and net income growth in the last 12 months showcase better financial performance.
12-Month Trailing Net Income Ratio Higher than X Industry: High net income ratio indicates a company’s solid profitability.
% Rating Strong Buy greater than 70%:This indicates that 70% of the analysts covering these stocks are optimistic.
Here are five of the nine stocks that qualified the screening:
Facebook, Inc. operates a social networking website worldwide, where users connect, share and communicate with each other. This Zacks Rank #1 company has an average four-quarter earnings surprise of 18.3%.
AMN Healthcare Services Inc. is a travel healthcare staffing company. This Zacks Rank #1 company has an average four-quarter earnings surprise of 23.6%.
NuVasive, Inc. is a medical device company focused on the design, development and marketing of products for the surgical treatment of spine disorders. This Zacks Rank #1 company has an average four-quarter earnings surprise of 19%.
TRI Pointe Group, Inc. (TPH - Free Report) is engaged in construction, design and sale of single-family homes. This Zacks Rank #1 company has an average four-quarter earnings surprise of 34.6%.
Entegris, Inc. (ENTG - Free Report) is a leading provider of materials management solutions to the microelectronics industry including semiconductor manufacturing and disk manufacturing markets. This Zacks Rank #1 company has an average four-quarter earnings surprise of 20.7%.
While backtesting over a two-year timeframe (July 25, 2014 to July 22, 2016), a portfolio following this strategy provided a total return of 21.7% compared with the S&P 500’s return of 7.8%. Thus, this strategy may prove profitable for those looking to beat the markets.
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.
Zacks Restaurant Recommendations: In addition to dining at these special places, you can feast on their stock shares. A Zacks Special Report spotlights 5 recent IPOs to watch plus 2 stocks that offer immediate promise in a booming sector. Download it free »