For Immediate Release
Chicago, IL – January 14, 2020 – Stocks in this week’s article are Shoe Carnival, Inc.
SCVL, Crawford United Corp. CRAWA, Tilly's Inc. TLYS, SYNNEX Corp. ( SNX Quick Quote SNX - Free Report) and Momo Inc. MOMO. 5 Top Stocks with Impressive Net Profit Margin
The primary purpose of a business is to generate profits that can be reinvested in expansion or utilized for rewarding the company’s shareholders.
Net profit margin is an effective tool for measuring the profits reaped by a business.
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 gives 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 while analyzing 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/715724/5-top-stocks-with-impressive-net-profit-margin 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. About Screen of the Week
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