For Immediate Release
Chicago, IL – May 19, 2020 – Stocks in this week’s article are Teekay Tankers Ltd. (
TNK Quick Quote TNK - Free Report) , Career Education Corp. ( PRDO Quick Quote PRDO - Free Report) , Euronav NV ( EURN Quick Quote EURN - Free Report) , Eagle Bancorp Montana, Inc. ( EBMT Quick Quote EBMT - Free Report) and Vistra Energy Corp. ( VST Quick Quote VST - Free Report) . 5 Top-Rated Stocks Boasting Solid Net Profit Margins
Investors prefer to put their money into businesses that reap profits on a regular basis. In order to gauge the extent of profits, there is no better metric than net profit margin.
A higher net margin reflects the company’s efficiency in converting sales into actual profits.
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 a business’ value.
Moreover, a higher net profit margin compared with its peers provides 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.
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.
For the rest of this Screen of the Week article please visit Zacks.com at: https://www.zacks.com/stock/news/931002/5-toprated-stocks-that-boast-solid-net-profit-margins 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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