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Buy These 4 Stocks With Solid Net Profit Margin to Maximize Returns
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Key Takeaways
CPRX, GAMB, ORN and BWAY were selected for strong net profit margins and upward EPS estimate revisions.
Each stock posted consistent earnings beats over the past four quarters.
All four picks have a Zacks Rank of 1 or 2 and solid VGM Scores, suggesting further upside potential.
Net profit, also referred to as the bottom line, is one of the key tools to determine 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, pushing a company into the red. However, Catalyst Pharmaceuticals, Inc. (CPRX - Free Report) , Gambling.com Group Limited (GAMB - Free Report) , Orion Group Holdings, Inc. (ORN - Free Report) and BrainsWay Ltd. (BWAY - 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, 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 peers provides a 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: A 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.
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 18 stocks that qualified the screen:
Catalyst Pharmaceuticals is a commercial-stage biopharmaceutical company focused on the development and commercialization of therapies targeting rare and difficult-to-treat diseases. The stock sports a Zacks Rank of 1 at present and has a VGM Score of A. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Catalyst Pharmaceuticals’ 2025 earnings has been revised upward by 2 cents to $2.25 per share in the past 60 days. CPRX surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 28.2%.
Gambling.com is a marketing company as well as a provider of digital marketing services for the online gaming industry. The stock currently sports a Zacks Rank of 1 and has a VGM Score of A.
The Zacks Consensus Estimate for Gambling.com’s 2025 earnings has been revised upward by a penny to $1.17 per share in the past seven days. GAMB surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 68.7%.
Orion Group is a construction company that provides services on and off the water primarily in the continental United States, Alaska, Canada and the Caribbean Basin. The company's operating segment consists of the heavy civil marine construction segment and the commercial concrete segment. The stock sports a Zacks Rank of 1 at present and has a VGM Score of B.
The Zacks Consensus Estimate for Orion Group’s 2025 earnings has been revised upward by a penny to 17 cents per share over the past seven days. ORN surpassed the Zacks Consensus Estimate thrice in the trailing four quarters while missing the same on one occasion, the average surprise being -104.4%.
BrainsWay is a commercial-stage medical device company. The company is focused on the development and sale of non-invasive neuromodulation products using its proprietary Deep Transcranial Magnetic Stimulation technology for the treatment of major depressive disorder and obsessive-compulsive disorder. The stock carries a Zacks Rank of 2 at present and has a VGM Score of A.
The Zacks Consensus Estimate for BrainsWay’s 2025 earnings has been revised upward by a penny to 31 cents per share in the past 60 days. BWAY surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 153.3%.
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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Buy These 4 Stocks With Solid Net Profit Margin to Maximize Returns
Key Takeaways
Net profit, also referred to as the bottom line, is one of the key tools to determine 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, pushing a company into the red. However, Catalyst Pharmaceuticals, Inc. (CPRX - Free Report) , Gambling.com Group Limited (GAMB - Free Report) , Orion Group Holdings, Inc. (ORN - Free Report) and BrainsWay Ltd. (BWAY - 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, 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 peers provides a 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: A 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.
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 18 stocks that qualified the screen:
Catalyst Pharmaceuticals is a commercial-stage biopharmaceutical company focused on the development and commercialization of therapies targeting rare and difficult-to-treat diseases. The stock sports a Zacks Rank of 1 at present and has a VGM Score of A. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Catalyst Pharmaceuticals’ 2025 earnings has been revised upward by 2 cents to $2.25 per share in the past 60 days. CPRX surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 28.2%.
Gambling.com is a marketing company as well as a provider of digital marketing services for the online gaming industry. The stock currently sports a Zacks Rank of 1 and has a VGM Score of A.
The Zacks Consensus Estimate for Gambling.com’s 2025 earnings has been revised upward by a penny to $1.17 per share in the past seven days. GAMB surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 68.7%.
Orion Group is a construction company that provides services on and off the water primarily in the continental United States, Alaska, Canada and the Caribbean Basin. The company's operating segment consists of the heavy civil marine construction segment and the commercial concrete segment. The stock sports a Zacks Rank of 1 at present and has a VGM Score of B.
The Zacks Consensus Estimate for Orion Group’s 2025 earnings has been revised upward by a penny to 17 cents per share over the past seven days. ORN surpassed the Zacks Consensus Estimate thrice in the trailing four quarters while missing the same on one occasion, the average surprise being -104.4%.
BrainsWay is a commercial-stage medical device company. The company is focused on the development and sale of non-invasive neuromodulation products using its proprietary Deep Transcranial Magnetic Stimulation technology for the treatment of major depressive disorder and obsessive-compulsive disorder. The stock carries a Zacks Rank of 2 at present and has a VGM Score of A.
The Zacks Consensus Estimate for BrainsWay’s 2025 earnings has been revised upward by a penny to 31 cents per share in the past 60 days. BWAY surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 153.3%.
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_disclosure/.