First Profit

By Kevin Matras
On 1:00 am EDT, Tuesday October 13, 2009

As third quarter earnings season gets underway, I've been running a screen with an interesting concept: to find companies that have just recently shown their first quarterly profit within the last year.

Since earnings season has just begun, the last quarter for most of these companies will have ended 6/2009. Although, there will be some that have already reported for 9/09.

Nonetheless, the idea is to find companies that have just recently produced their first profit after having not shown a profit for at least the previous 4 quarters.

Some of these companies will be relatively new, and this recent profit may be the only profit in its history - so far.

For others, they may have a long history of profitability, but have seen a contraction over the last year as the recession raged on. However, they have finally returned to profitability.

I like this concept because if the trend has been one of improvement, there's a good chance that the trend will continue. This is true whether you've been profitable or are just getting profitable.

But some (like myself for example) dislike buying companies that cannot show a profit. There are many others who won't even consider a stock unless it's making money.

Losing less than the previous quarter is indeed an improvement. In that respect, by definition, it is growth, i.e., they're growing less unprofitable. It's even better if the losses are less and less in each sequential quarter.

But there's something entirely different about growth AND profitability. And those are the stocks that will likely see the best new demand from new investors; people who are now, all of a sudden, willing to take notice of and pay attention to the stock.

And that's what we're screening for today:

EPS for the previous 4 Quarters less than or equal to 0

(This means in each of the previous 4 quarters (except the most recently-reported quarter) the company has reported earnings of less than or equal to zero, i.e., no profit.)
EPS for the recently reported quarter > 0
(This time, the company reported earnings greater than zero, meaning they finally showed a profit.)
Current Price >= 5
(I prefer to only look at companies over $5. But if you drop this item from the screen, it'll currently produce three times as many stocks coming thru the screen.)

BTW - for those who have the Research Wizard and want to build this on their own - here's what the screen looks like. You don't have to use the calculation expression feature either. It can all be done from the main page. (See below.)

The screen is pretty simple yet pretty powerful.

Here are 5 stocks that made it thru this week's screen (for 10/13/09):

DTG Dollar Thrifty Automotive Group, Inc. (reports 11/4/09)

GLBC Global Crossing Ltd. (reports 10/28/09)

LM Legg Mason, Inc. (reports 10/22/09)

LOCM Local.com Corp. (reports 11/5/09)

IMAX IMAX Corp. (reports 11/5/09)

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.

Disclosure: Performance information for Zacks' portfolios and strategies are available at: http://www.zacks.com/performance.

IMAX CORP (IMAX): Free Stock Analysis Report

LOCAL.COM CORP (LOCM): Free Stock Analysis Report

LEGG MASON INC (LM): Free Stock Analysis Report

DOLLAR THRIFTY (DTG): Free Stock Analysis Report

GLOBAL CROSSING (GLBC): Free Stock Analysis Report

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