Chicago, IL – June 27, 2012 - Stocks in this week's article include Align Technology Inc. (NASDAQ: ALGN), LeapFrog Enterprises Inc. (NYSE: LF), TransDigm Group Inc. (NYSE: TDG), Ulta Salon, Cosmetics & Fragrance, Inc. (NASDAQ: ULTA) and Whole Foods Market, Inc. (NASDAQ: WFM). Kevin Matras looks at the powerful combination of Sales Growth and Increasing Profit Margins.
Screen of the Week written by Kevin Matras of Zacks Investment Research:
This week I want to focus on Sales Growth and Profit Margins. While everybody understands sales, margins might bring up a few question marks. With earnings season only a few weeks away, now is the perfect time to look at this.
So let's start at the beginning: first and foremost, sales are THE most important thing to a company. Everything else stems from that. Without sales, there really wouldn't be anything else to analyze. And Sales Growth numbers show you how that company is growing.
However, just because sales are increasing, doesn't always mean that profits are increasing too. Sales at the expense of profits does not work. So paying attention to Profit Margins is the next thing we're going to want to look at.
Margin is simply a ratio and the calculation is: Net Income divided by Sales
So if a company's margin is 15% for instance, that means its net income is 15 cents for every $1 of sales it makes. But if a company's expenses are growing faster than sales, this will reduce its margins. In general, a company with increasing margins is becoming more profitable and is better managed, i.e., its costs are under control.
So continue to look at their sales numbers. And of course, look at their earnings too. But take a look at their profit margins as well. Are they going up or down? In other words, are they making more money on each dollar of sales they make, or less? This is important stuff to know, and can make a huge difference in your portfolio's bottom line.
Parameters for this week’s screen are...
For the rest of this Screen of the Week article, please visit Zacks.com at: http://www.zacks.com/commentary/22012/
Sign up now for your free trial today and start picking better stocks immediately. And with the backtesting feature, you can test your ideas to see how you can improve your trading in both up markets and down markets. Don't wait for the market to get better before you decide to do better. Start learning how to be a better trader today: http://at.zacks.com/?id=5529
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.
About Screen of the Week
Zacks.com created the first and best screening system on the web earning the distinction as the "#1 site for screening stocks" by Money Magazine. But powerful screening tools is just the start. That is why Zacks created the Screen of the Week to highlight profitable stock picking strategies that investors can actively use. Each week, Zacks Profit from the Pros free email newsletter shares a new screening strategy. Learn more about it here http://at.zacks.com/?id=5530
Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Leonard Zacks. As a PhD in mathematics Len knew he could find patterns in stock market data that would lead to superior investment results. Amongst his many accomplishments was the formation of his proprietary stock picking system; the Zacks Rank, which continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros http://at.zacks.com/?id=5531
Follow us on Twitter: http://twitter.com/zacksresearch
Join us on Facebook: http://www.facebook.com/home.php#/pages/Zacks-Investment-Research/57553657748?ref=ts
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.
Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.
More From Zacks.com
- Investment & Company Information