5 top-ranked stocks with impressive net profit margins

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The main goal of a business is to generate profits that can be reinvested in expansion or used to reward the shareholders of a business. The net profit margin is an effective tool for measuring the profits earned by a business.

A higher net margin emphasizes a company’s efficiency in translating sales into real profits. Additionally, this metric provides insight into how a business is run and what headwinds are hanging over it. TimkenSteel TMST, Genco Shipping & Trading GNK, PDC Energy PDCE, Investment product partners CPLP and ModivCare MODV has strong net profit margins.

Net profit margin = Net profit / sales * 100.

Simply put, net profit is the amount a business keeps after deducting all costs, interest, depreciation, taxes, and other expenses. In fact, the net profit margin can prove to be a powerful benchmark for assessing the soundness of a company’s operations and its cost control measures.

In addition, a higher net profit is essential to reward stakeholders. Additionally, the strength of the metric not only attracts investors, but also attracts well-qualified employees who ultimately enhance the value of a business.

In addition, a higher net profit margin than that of its peers gives a company a competitive advantage.

Advantages and disadvantages

Net profit margin helps investors better understand a company’s business model in terms of pricing policy, cost structure, and manufacturing efficiency. Therefore, a high net profit margin is preferred by all categories of investors.

However, the net profit margin, as an investment criterion, has its share of pitfalls. The metric varies greatly from industry to industry. While net income is a key metric for measuring investment in traditional industries, it is not that important for technology companies.

In addition, the difference in the accounting treatment of various items – especially non-cash expenses like depreciation and stock-based compensation – makes comparison a difficult task.

Plus, for companies that prefer to grow with debt rather than equity financing, higher interest charges usually weigh on bottom line. In such cases, the measurement is rendered ineffective while analyzing the performance of a business.

The winning strategy

A healthy net profit margin and strong 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 return from this strategy.

Screening parameters

12-month net margin – Most recent (%) greater than or equal to 0: A high net profit margin indicates strong profitability.

Percentage of variation of BPA F (0) / (F-1) greater than equal to 0: It indicates profit growth.

Average broker rating (1-5) equal to 1: A rating of # 1 indicates the brokers’ extreme optimism about the stock.

Rank of Zacks less than or equal to 2: Stocks with a Zacks # 1 (Strong Buy) or 2 (Buy) ranking generally outperform their peers in all types of market environment. You can see The full list of today’s Zacks # 1 Rank stocks here.

VGM score of A or B: Our research shows that stocks with an VGM score of A or B, when combined with a rank 1 or 2 of Zacks, offer the best upside potential.

Here we discuss our five picks out of the 43 actions that qualified the screen:

TimkenSteel is engaged in the manufacture of alloy steel, as well as carbon and micro-alloy steel. The company currently sports a Zacks rank of 1 and has an VGM score of A.

Zacks’ consensus estimate for TimkenSteel’s earnings in 2021 has been revised up to $ 3.03 from $ 2.42 in the past 30 days. TMST has beaten Zacks’ consensus estimate over the past four quarters, with an average surprise of 59.2%.

Genco Shipping & Trading is a shipowner company. It transports iron ore, coal, grain, steel products and other dry bulk cargoes along sea routes. Genco Shipping & Trading currently boasts a Zacks # 1 rank and has a VGM score of A.

Zacks’ consensus estimate of $ 4.12 for Genco Shipping & Trading’s current year profit has risen 14.1% northward in the past 30 days. GNK has beaten Zacks’ consensus estimate over the past four quarters with an average surprise of 42.6%.

PDC Energy is an independent upstream operator engaged in the exploration, development and production of natural gas, crude oil and natural gas liquids. The company currently sports a Zacks rank of 1, and an VGM score of B.

Zacks’ consensus estimate for PDC Energy’s earnings in 2021 has been revised up to $ 7.82 from $ 6.69 in 30 days. The PDCE has beaten Zacks’ consensus estimate over the past four quarters, with an average surprise of 51.1%.

Capital Product Partners is an international shipping company and a leader in the marine transportation of refined petroleum products and chemicals. The company currently sports a Zacks rank of 1 and a VGM score of B.

Zacks ‘consensus estimate for Capital Product Partners’ current year earnings has fallen from $ 2.18 to $ 2.39 in the past 30 days. The CPLP has beaten Zacks’ consensus estimate twice in the past four quarters while missing the same thing twice, with the average surprise being 11.4%.

ModivCare is a technology-based health services company. It offers a suite of integrated supportive care solutions to public and private actors and their patients. The company currently sports a Zacks rank of 1 and a VGM score of B.

Zacks’ consensus estimate for ModivCare’s earnings in 2021 has been revised up to $ 7.53 from $ 6.41 in the past 30 days. MODV has beaten Zacks’ consensus estimate in three of the past four quarters while missing the same once, with the average surprise being 12.3%.

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Disclosure: Officers, directors and / or employees of Zacks Investment Research may own or have sold securities short and / or hold long and / or short positions in options mentioned in this document. An affiliated investment advisory firm may own or have sold securities short and / or hold long and / or short positions in options mentioned in this document.

Disclosure: Information on the performance of Zacks’ portfolios and strategies is available at: https: //www.zacks.com/performance/.

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Genco Shipping & Trading Limited (GNK): Free Stock Analysis Report

PDC Energy, Inc. (PDCE): Free Inventory Analysis Report

Timken Steel Corporation (TMST): Free Inventory Analysis Report

Capital Product Partners LP (CPLP): Free Stock Analysis Report

ModivCare Inc. (MODV): Free Inventory Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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