The main objective of any investor is to make the most of his investments. Thus, they are always looking for companies that accumulate huge sums.
Net profit margin is the most effective way to measure a company's profitability. A correct analysis of the same thing reveals the good management of a company and the obstacles that face it.
Net profit margin= Net profit/Sales * 100
In simple terms, net profit is the amount that a corporation retains after deducting all costs, interest, depreciation, taxes, and other charges. In fact, the net profit margin can prove to be a powerful point of reference for assessing the strength of the company's operations and cost control measures.
In addition, higher net profit is essential for rewarding stakeholders. In addition, the strength of metrics attracts not only investors, but also attracts skilled employees who ultimately contribute to the value of the business.
In addition, 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 price policy, cost structure and manufacturing efficiency. As a result, a high net profit margin is preferred by all classes of investors.
However, net profit margin as an investment criterion has its own set of pitfalls. The metric varies greatly from one sector to another. While net income is a key parameter for measuring investment in traditional industries, it is not very important for technology companies.
In addition, the difference in the accounting treatment of various items – particularly non-cash expenses such as depreciation and stock-based compensation – makes comparison difficult.
In addition, for companies that prefer to grow with debt rather than capitalization, higher interest expense typically weighs on net income. In this case, the measure becomes ineffective when analyzing the performance of a company.
The winning strategy
A healthy profit margin and strong growth in net operating income are the two most sought after elements in a business model.
In addition to these, we have added some criteria to ensure maximum performance of this strategy.
Net margin 12 months– Most recent (%) greater than 0: High net profit margin indicates strong profitability.
Percentage change of SPE F (0) / (F-1) greater than 0: This indicates earnings growth.
Average rating of brokers (1-5) equal to 1: Note 1 indicates that brokers are extremely optimistic about the security.
Zacks Rank less than or equal to 2: Stocks with rank 1 rank (strong purchase) or 2 (buy) ranks generally outperform their peers in all types of market environments. You can see the complete list of current stocks of Zacks # 1
VGM Score from A or B: Our research shows that stocks with a VGM score of A or B when combined with a rank of rank 1 or 2 Zacks offer the best upside potential.
Here are five of the 24 actions that qualified the screen:
Headquartered in Plano, TX, Integrated Diodes (DIODE – Free report) is a manufacturer and supplier of application-specific standard products, primarily for the communications, industrial computing, consumer electronics and automotive markets. The title is ranked in the class of Zacks by 1 and the score A. in VGM grade. Zacks consensus estimate for the 2018 fiscal year gains of $ 2.35 remained unchanged over the past 30 days.
Stamford, based on CT Group of Information Services, Inc. (III – Free report) is a research and technology consulting company operating around the world. The title is ranked first and displays a VGM score of A. The Zacks consensus estimate for the 2018 fiscal year has been maintained at 43 cents over the past 30 days.
Based in Houston, TX, Exterran Corporation (EXTN – Free report) offers compression, production and processing solutions that facilitate the production and transportation of oil and gas. The title is a player ranked first in the Zacks and has a VGM score of A. In addition, the Zacks consensus estimate for 2018 has remained constant at 38 cents over the past 30 days.
Based in Evansville, IN,Carnival Shoes, Inc.. (SCVL – Free report) offers a wide assortment of moderately priced street shoes, clothing and sportswear for men, women and children, with a focus on national and regional brands. The Zacks consensus estimate for 2019 of $ 2.38 has remained unchanged in the last 30 days. The stock has a # 1 Zacks ranking and a VGM score of A.
Based in Black Mountain, NC Ingles Markets, Inc. (IMKTA – Free report) is a large supermarket chain operating in the southeastern United States. The Zacks consensus estimate for 2018 has been revised upward by 3.2% to $ 3.20 over the last 30 days. The title has a Zacks ranking of 1 and a VGM score of A.
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