6 Highest-Ranking Stocks With Robust Net Profit Margins


The main purpose of a business is to generate profits which can be reinvested in expansion or used to reward a company’s shareholders.

The net profit margin is an effective tool to measure the profits made by a business. A higher net margin highlights a company’s efficiency in translating sales into actual profits. Additionally, this metric provides insight into the quality of a company’s management and the headwinds hanging over it.

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, net profit margin can prove to be a powerful benchmark for assessing the strength of a company’s operations and its cost control measures.

In addition, a higher net profit is essential to reward stakeholders. Moreover, the strength of the metric not only attracts investors, but also attracts qualified employees who ultimately improve the value of a company.

Additionally, a higher net profit margin than its peers gives the 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 classes of investors.

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

In addition, the difference in accounting treatment of various items, particularly non-cash expenses such as amortization and stock-based compensation, makes comparison difficult.

In addition, for companies that prefer to develop debt rather than equity, higher interest expense generally weigh on net income. In such cases, the measure is rendered ineffective, while analyzing the performance of a company.

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 some criteria to ensure maximum return from this strategy.

screening parameters

Net margin 12 months – Most recent (%) greater than 0: A high net profit margin indicates strong profitability.

Percentage change in EPS 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 extreme broker optimism on the stock.

Zacks rank less than or equal to 2: Stocks with a Zacks rank of #1 (strong buy) or 2 (buy) generally perform better than their peers in all types of market environments. 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 a VGM score of A or B, when combined with a Zacks rank #1 or 2, offer the most upside potential.

Here are six of the 40 stocks that qualified the screen:

Sterling Construction Company STRL is a leading heavy civil construction company specializing in the construction and reconstruction of transportation and water infrastructure projects in the United States. The stock currently has a Zacks Rank of 1 and a VGM Score of A. The Zacks Consensus Estimate for 2021 earnings has been revised up to $1.98 from $1.87 in 60 days.

Euromers ESEA was created under the laws of the Republic of the Marshall Islands to consolidate the interests as the owner of the ship Pittas family of Athens, Greece, who work in the maritime industry for 136 years. It operates in the markets of transport of dry cargo, dry bulk and containers. At present, the action shows a Zacks # 1 rank and VGM score of A. The Zacks Consensus estimate of $ 6.25 for its profits for the current year has shifted from 52, 4% to the north in the last seven days.

Fidelity National Securities Group FNF is a leading provider of title insurance, specialty insurance and claims management services. Currently, the stock has a Zacks rank of 1 and a VGM score of B. The consensus rating for this year’s earnings has risen 48 cents to $6.62 over the past 30 days.

KT company KT provides telecommunication services. Its services include mobile telecommunications services, telephone services, landline telephone services and VoIP. Currently, the stock has a Zacks rank of 2 and a VGM score of A. The Zacks consensus estimate of $1.55 for 2021 earnings has been revised up by 9.9% in course of the last 60 days.

Portman Ridge Financial Corporation PTMN is an investment company. It focuses on investments in consumer products, food and beverages, healthcare, logistics and distribution, media, telecommunications, education, aerospace and defense, industrial industries and environmental. Currently, the stock has a Zacks rank of 2 and a VGM score of A. The consensus rating for profits of the current year increased by 80 cents to $ 3.90 last week.

Unified UFI is a global textile solutions provider and one of the world’s leading innovators in the manufacture of synthetic and recycled performance fibers. The company’s proprietary technologies provide increased performance, comfort and style benefits, enabling customers to develop products that perform better, look better and are more comfortable to wear. Currently, the stock has a Zacks rank of 2 and a VGM score of A. The Zacks consensus estimate of $1.36 for fiscal 2022 earnings has moved 21 cents north during the last 60 days.

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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 the options mentioned herein. An affiliated investment advisory firm may hold or have shorted securities and/or hold long and/or short positions in options mentioned herein.

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

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KT Corporation (KT): Free Stock Analysis Report

Fidelity National Financial, Inc. (FNF): free Equity Research Report

Sterling Construction Company Inc (STRL): Free Stock Analysis Report

Euroseas Ltd. (ESEA): Free Stock Analysis Report

Unifi, Inc. (UFI): Free Stock Analysis Report

Portman Ridge Finance Corporation (PTMN): Free Stock 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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