For Immediate Release
Chicago, IL – March 20, 2018 - Stocks in this week’s article Harsco Corporation (HSC - Free Report) , Kulicke and Soffa Industries, Inc. (KLIC - Free Report) , Post Holdings, Inc. (POST - Free Report) , Modine Manufacturing Company (MOD - Free Report) and SP Plus Corporation (SP - Free Report) .
Bet on These Stocks with Solid Net Profit Margins
Investors eye businesses that report profits on a regular basis. In order to gauge the extent of profit, there is no better metric than net profit margin.
A higher net margin reflects a company’s efficiency in converting sales into actual profit. Moreover, this metric lends an insight into how well a company is run and the headwinds confronting it.
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 in a company operations and 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 that eventually add to the value of the business.
Moreover, a higher net profit margin compared to its peers lends 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 own 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.
Moreover, the difference in accounting treatment of various items — especially non-cash expenses like depreciation and stock-based compensation — makes comparison a daunting task.
Further, 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 to analyze a company’s performance.
For the rest of this Screen of the Week article please visit Zacks.com at: https://www.zacks.com/stock/news/296098/bet-on-these-6-stocks-with-solid-net-profit-margin
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