3 Most Profitable Stocks to Invest in Using Net Income Ratio
Investors are always looking for profitable companies. Thus, the profitability analysis identifies a profitable business rather than a loss-making business. The break-even analysis is the best tool for measuring a company’s ability to deliver strong returns to investors, even after all operating and non-operating costs have been assumed.
Here we have used the concept of accounting ratios to assess the profitability of a business. There are a variety of profitability ratios, from which we have chosen the most effective and frequently used measure of profitability to determine the overall performance of a business.
Net income ratio
The net income ratio gives us the exact level of profitability of a company. It reflects the percentage of net income in relation to total turnover. Using the net income ratio, one can determine the efficiency of a business in covering operating and non-operating expenses from revenues. A higher net income ratio generally implies a company’s ability to generate significant revenue and successfully manage all business functions.
The net income ratio is not the only indicator of future winners. We have therefore added a few additional criteria to arrive at a winning strategy.
Zacks Rank equal to No. 1: Whether the market is good or bad, stocks with a Zacks Rank #1 (Strong Buy) have a proven history of outperformance. You can see the full list of today’s Zacks #1 Rank stocks here.
Growth in sales and net income over the last 12 months greater than X industry: Stocks that have outperformed the sector in sales and net income growth over the past 12 months are well positioned to perform well.
Last 12 months net income ratio greater than X Industry: A high net income ratio indicates the solid profitability of a company.
Strong Buy Percent Rating Over 70: This indicates that 70% of current broker recommendations for the stock are Strong Buy.
These few parameters reduced the universe from more than 7,685 stocks to just 11.
Here are three of the 11 actions that qualified the screening:
PM materials MP is the producer of rare earths mainly in the western hemisphere. MP Materials primarily owns and operates Mountain Pass. MP’s 12-month net profit margin is 40.7%.
Silvergate Capital SI is a bank holding company for Silvergate Bank. Silvergate Capital is based in La Jolla, USA. SI’s 12-month net profit margin is 45.6%.
PO Bancorp OPBK provides commercial banking services to retail and institutional clients. OP Bancorp offers business loans, home loans, online banking, cash management, certificates of deposit, wire transfers, and debit and credit card services. OPBK’s 12-month net profit margin is nearly 36%.
You can get the rest of the stocks on this list by signing up for your free 2-week trial to Research Assistant now and start using this screen in your own trading. Moreover, you can also create your own strategies and test them before diving into investing.
The research assistant is a great starting point. It’s easy to use. Everything is in plain language. And it’s very intuitive. Start your search assistant trial today. And the next time you’re reading an economic report, open up the research assistant, plug in your findings, and see what gems come out.
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 the options mentioned herein. An affiliated investment adviser 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.
Zacks names ‘only one best choice for doubling up’
From thousands of stocks, 5 Zacks experts have each picked their favorite to skyrocket by +100% or more in the coming months. Of these 5, Research Director Sheraz Mian selects one to have the most explosive advantage of all.
It’s a little-known chemical company that’s up 65% year-on-year, but still very cheap. With relentless demand, rising earnings estimates for 2022 and $1.5 billion for stock buybacks, retail investors could step in at any time.
This company could rival or surpass other recent Zacks stocks that are expected to double, such as Boston Beer Company which jumped +143.0% in just over 9 months and NVIDIA which jumped +175.9% in one. year.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.