Back to top

Image: Bigstock

4 Stocks With Solid Net Profit Margins to Maximize Portfolio Returns

Read MoreHide Full Article

Key Takeaways

  • VNCE, ASX, OBT and GEO demonstrate solid net profit margins, reflecting operational strength.
  • All stocks have witnessed upward EPS estimate revisions recently, highlighting confidence in their outlooks.
  • All picks hold high Zacks Ranks and strong VGM Scores, supporting their upside potential.

Investors focus on businesses that consistently generate profits. The net profit margin is key to assessing profitability. A higher net margin indicates a company's efficiency in converting sales into actual profits, providing insights into its operational effectiveness and the challenges it faces. Companies like Vince Holding Corp. (VNCE - Free Report) , ASE Technology Holding Co., Ltd. (ASX - Free Report) , Orange County Bancorp, Inc. (OBT - Free Report) and The GEO Group, Inc. (GEO - Free Report) exhibit strong net profit margins.

Net Profit Margin = Net Profit / Sales * 100

Net profit represents the amount a company retains after all costs, interest, depreciation, taxes and other expenses are deducted. The net profit margin can be a valuable indicator of a company's operational strength and cost management. Higher net profits are crucial for rewarding stakeholders and attracting skilled employees, ultimately enhancing business value. A higher net profit margin compared to competitors provides a competitive edge.

Pros and Cons of Net Profit Margin Strategy

Net profit margin offers investors clarity on a company’s business model, including its pricing policy, cost structure and manufacturing efficiency. A strong net profit margin is preferred by all types of investors. However, this metric has its limitations. It varies significantly across industries, and while net income is crucial in traditional sectors, it is less relevant for technology companies. Differences in accounting treatments, particularly for non-cash expenses like depreciation and stock-based compensation, can complicate comparisons.

Moreover, companies that grow through debt rather than equity funding incur higher interest expenses, which can negatively impact net profit. In such cases, the net profit margin becomes less effective for evaluating performance. Despite these challenges, net profit margin remains a fundamental measure for understanding a company's profitability and operational efficiency.

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 seven stocks that qualified the screen:

Vince Holding offers a broad range of women's and men's ready-to-wear, including its signature cashmere sweaters, leather jackets, luxe leggings, dresses, silk and woven tops, denim and footwear. The stock sports a Zacks Rank #1 and has a VGM Score of B.

The Zacks Consensus Estimate for Vince Holding’s fiscal 2027 earnings has moved upward by 112.3% to $1.21 per share over the past 60 days. VNCE beat the Zacks Consensus Estimate for earnings thrice in the trailing four quarters while missing on one occasion, the average surprise being 561.4%.

ASE Technology is a provider of semiconductor manufacturing services in assembly and testing. The company develops and offers complete turnkey solutions covering front-end engineering testing, wafer probing and final testing as well as IC packaging, materials and electronic manufacturing services. The stock sports a Zacks Rank #1 and has a VGM Score of B.

The Zacks Consensus Estimate for ASE Technology’s 2026 earnings has moved upward by 4 cents to $1.31 per share over the past 30 days. ASX’s earnings surpassed the Zacks Consensus Estimate by 8.8% in the last reported quarter.

Orange County Bancorp is the parent company of Orange Bank & Trust Company and Hudson Valley Investment Advisors, Inc. Through its subsidiaries, the company provides commercial and consumer banking services to individuals, small businesses and local municipal governments. The stock carries a Zacks Rank of 2 at present and has a VGM Score of B.

The Zacks Consensus Estimate for Orange County Bancorp’s 2026 earnings has been revised upward by 10 cents to $3.63 per share in the past seven days. In the last reported quarter, OBT’s earnings topped the Zacks Consensus Estimate by 13.4%.

The GEO Group is a diversified government service provider, specializing in design, financing, development and support services for secure facilities, processing centers and community reentry centers principally in the United States, Australia, South Africa and the United Kingdom. The stock carries a Zacks Rank #2 and has a VGM Score of B.

The Zacks Consensus Estimate for The GEO Group’s 2026 earnings has moved upward by 2 cents to $1.33 per share over the past 30 days. GEO outpaced the Zacks Consensus Estimate thrice in the trailing four quarters while matching the same on one occasion, with the average surprise being 24.6%.

Published in