A Trio of High Ebitda Margin Ratio Stock Picks
- By Alberto Abaterusso
If you want to increase your likelihood to come across companies in good shape from a financial standpoint, one method is to look for stocks whose Ebitda margins are beating that of the S&P 500, which stands at 15.6% as of the writing of this article.
The Ebitda margin (which is the earnings before interest, tax, depreciation and amortization divided by the total revenue) is a reliable financial indicator of a company's financial health as it has no need to consider specific corporate filing decisions and tax laws when evaluating the company's performance.
The three companies listed below have high Ebitda margins and positive ratings from Wall Street sell-side analysts.
Mastercard Inc
The first company that makes the cut is Mastercard Inc (NYSE:MA), a Purchase, New York-based global provider of credit card services.
Mastercard's Ebitda margin is 57%, as its Ebitda for the trailing 12 months ended in December 2020 was $8.72 billion and revenue for the trailing 12 months was $15.3 billion.
The share price has grown by 46% over the past year to trade at $387.06 at close on Friday for a market capitalization of $384.49 billion, a 52-week range of $252.83 to $389.88 and an enterprise value-to-Ebitda ratio of 44.34 versus the industry median of 14.44.
The stock's dividend yield is 0.43%.
On Wall Street, the stock has a median recommendation rating of buy and an average target price of $405.17 per share.
Vanguard Group Inc leads the group of top fund holders with 7.10% of shares outstanding. It is followed by BlackRock Inc. with 6.79% of shares outstanding and FMR LLC with 3.58% of shares outstanding.
NVIDIA Corp
The second company that makes the cut is NVIDIA Corp (NASDAQ:NVDA), a Santa Clara, California-based producer of graphics processing units and system on chip units for the consumer electronics, computer hardware, semiconductors and video game industries.
NVIDIA Corp's Ebitda margin is 34.12%, as its Ebitda for the trailing 12 months ended in January 2021 was $5.691 billion and revenue for the trailing 12 months was $16.675 billion.
The share price has grown by 105.54% over the past year to close at $610.61 on Friday for a market capitalization of $378.58 billion, a 52-week range of $280.6 to $648.566 and an enterprise value-to-Ebitda ratio of 65.85 versus the industry median of 20.01.
The stock's dividend yield is 0.1%.
On Wall Street, the stock has a median recommendation rating of overweight and an average target price of $660.58 per share.
Vanguard Group Inc leads the group of top fund holders with 7.75% of shares outstanding. It is followed by BlackRock Inc. with 7.24% of shares outstanding and FMR LLC with 7.21% of shares outstanding.
The Home Depot Inc
The third stock to consider is The Home Depot Inc (NYSE:HD), an Atlanta-based operator of home improvement retail stores in North America and Mexico.
The Home Depot's Ebitda margin is 15.80%, as its Ebitda for the trailing 12 months ended in January 2021 was $20.844 billion and revenue for the trailing 12 months was $132.110 billion.
The share price has risen by 48.74% over the past year to close at $323.89 on Friday, determining a market capitalization of $348.25 billion, a 52-week range of $214.01 to $328.83 and an enterprise value-to-Ebitda ratio of 18.41 versus the industry median of 12.92.
The stock's dividend yield is 1.9%.
On Wall Street, the stock has a median recommendation rating of overweight and an average target price of $314.61 per share.
Vanguard Group Inc is the leader in the group of top fund holders with 8.33% of shares outstanding. It is followed by BlackRock Inc. with 6.70% of shares outstanding and State Street Corp with 4.50% of shares outstanding.
Disclosure: I have no positions in any securities mentioned in this article.
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This article first appeared on GuruFocus.
