U.S. Markets closed

4 Profitable Stocks to Boost Returns Using Net Income Ratio

  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
·4 min read
In this article:
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.

Investors always look for companies with a high level of profitability regardless of the present market condition. In this context, profitability analysis is used to identify a profitable company over a loss-making one. Profitability analysis is the best tool to measure the ability of the company to offer sturdy returns to investors even after meeting all its operating and non-operating costs.

Here, we have used the concept of accounting ratios to evaluate a company’s profitability. There is a variety of profitability ratios, from which we have chosen the most successful and frequently used profitability metric to determine the bottom-line performance of a company.

Net Income Ratio

Net income ratio tells us the exact profitability level of a company. It reflects the percentage of net income to total sales revenues. Using net income ratio, one can determine a company’s effectiveness to meet operating and non-operating expenses from revenues. A higher net income ratio usually implies a company’s ability to generate ample revenues and successfully manage all its business functions.

Screening Parameters

Net income ratio is one of our key screening parameters. However, to find out the sure winners, we have added a few additional criteria to arrive at an efficient strategy.

Zacks Rank Equal to #1: No matter 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 complete list of today’s Zacks #1 Rank stocks here.

Trailing 12-Month Sales and Net Income Growth Higher than X Industry: Stocks that have witnessed higher-than-industry sales and net income growth in the past 12 months are positioned to perform well.

Trailing 12-Month Net Income Ratio Higher than X Industry: High net income ratio indicates a company’s solid profitability.

Percentage Rating Strong Buy greater than 70: This indicates that 70% of the current broker recommendations for the stock are Strong Buy.

These few parameters have narrowed down the universe of more than 7,632 stocks to only 16.

Here are five of the 16 stocks that qualified the screen:

Danaos Corporation DAC is the owner of containerships, chartering vessels to many of the world's largest liner companies. Its 12-month net profit margin is more than 100%.

Boyd Gaming Corporation BYD is the owner and operator of 22 gaming entertainment properties located in Nevada, Illinois, Indiana, Iowa, Kansas, Louisiana, Mississippi and New Jersey. Its 12-month net profit margin is 11.5%.

Costamare Inc. CMRE is the owner and charter of containerships to liner companies across the world. Its 12-month net profit margin is 40.6%.

Meridian Bioscience, Inc. VIVO is the developer, manufacturer and distributor of diagnostic test kits primarily for gastrointestinal and respiratory infectious diseases, and elevated blood lead levels. Its 12-month net profit margin is 26.6%.

Magnolia Oil & Gas Corporation MGY is engaged in the acquisition, development, exploration, and production of oil, natural gas, and natural gas liquids reserves in the United States. Its 12-month net profit margin is 25.3%.

You can get the rest of the stocks on this list by signing up now for your 2-week free trial to the Research Wizard and start using this screen in your own trading. Further, you can also create your own strategies and backtest them first before taking the investment plunge.

The Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.

Click here to sign up for a free trial to the Research Wizard today.

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: https://www.zacks.com/performance.


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Meridian Bioscience Inc. (VIVO) : Free Stock Analysis Report
 
Boyd Gaming Corporation (BYD) : Free Stock Analysis Report
 
Costamare Inc. (CMRE) : Free Stock Analysis Report
 
Danaos Corporation (DAC) : Free Stock Analysis Report
 
Magnolia Oil & Gas Corp (MGY) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research