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4 Stocks Worth Buying Now on Solid Net Profit Margin
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Investors focus on businesses that consistently generate profits, and net profit margin is a key metric for assessing profitability. A higher net margin indicates a company's efficiency in converting sales into actual profits, providing insights into its operational effectiveness and the challenges it faces. Companies like Steelcase Inc. (SCS - Free Report) , SPAR Group, Inc. (SGRP - Free Report) , OneSpaWorld Holdings Limited (OSW - Free Report) and Brady Corporation (BRC - Free Report) exhibit strong net profit margins.
Net Profit Margin = Net Profit / Sales * 100
Net profit represents the amount a company retains after all costs, interest, depreciation, taxes, and other expenses are deducted. The net profit margin can serve as a valuable indicator of a company's operational strength and cost management. Higher net profits are crucial for rewarding stakeholders and attracting skilled employees, which ultimately enhances business value. Additionally, a higher net profit margin compared to competitors provides a competitive edge.
Pros and Cons of Net Profit Margin
Net profit margin offers investors clarity on a company’s business model, including its pricing policy, cost structure and manufacturing efficiency. A strong net profit margin is preferred by all types of investors. However, this metric has its limitations. It varies significantly across industries, and while net income is crucial in traditional sectors, it is less relevant for technology companies. Differences in accounting treatments, particularly for non-cash expenses like depreciation and stock-based compensation, can complicate comparisons.
Moreover, companies that grow through debt rather than equity funding incur higher interest expenses, which can negatively impact net profit. In such cases, the net profit margin becomes less effective for evaluating performance. Despite these challenges, net profit margin remains a fundamental measure for understanding a company's profitability and operational efficiency.
The Winning Strategy
A healthy net profit margin and solid EPS growth are the two most sought-after elements in a business model.
Apart from these, we have added a few criteria to ensure maximum returns from this strategy.
Screening Parameters
Net Margin 12 months – Most Recent (%) greater than equal to 0: High net profit margin indicates solid profitability.
Percentage Change in EPS F(0)/(F-1) greater than equal to 0: It indicates earnings growth.
Average Broker Rating (1-5) equal to 1: A rating of #1 indicates brokers’ extreme bullishness on the stock.
Zacks Rank less than or equal to 2: Stocks with a Zacks Rank #1 (Strong Buy) or 2 (Buy) generally perform better than their peers in all types of market environments. You can see the complete list of today’s Zacks #1 Rank stocks here.
VGM Score of A or B: Our research shows that stocks with a VGM Score of A or B, when combined with a Zacks Rank #1 or 2, offer the best upside potential.
Here we discuss our four picks from the 27 stocks that qualified the screen:
Steelcase is a designer and manufacturer of products used to create high-performance work environments. Its product portfolio includes furniture systems, seating, storage, desks, casegoods, interior architectural products, technology products and related products and services. The stock currently sports a Zacks Rank of 1 and has a VGM Score of B.
The Zacks Consensus Estimate for Steelcase’s fiscal 2025 earnings has been revised upward by 8 cents to $1.00 per share in the past 30 days. Steelcase surpassed the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 57.1%.
SPAR Group is a supplier of in-store merchandising and marketing services, and premium incentive marketing services throughout the United States and Canada. The stock sports a Zacks Rank of 1 at present and has a VGM Score of B.
The Zacks Consensus Estimate for SPAR Group’s 2024 earnings has been revised upward to 31 cents per share from 6 cents in the past 60 days. SGRP surpassed the Zacks Consensus Estimate thrice in the trailing four quarters while missing the same on one occasion, the average surprise being 418.8%.
OneSpaWorld is a provider and innovator in the fields of wellness, beauty, rejuvenation and transformation on cruise ships and on land. The stock currently carries a Zacks Rank of 2 and has a VGM Score of A.
The Zacks Consensus Estimate for OneSpaWorld’s 2024 earnings has been revised upward by 3 cents to 81 cents per share in the past 60 days. OSW surpassed the Zacks Consensus Estimate thrice in the trailing four quarters while missing the same on one occasion, the average surprise being 4.7%.
Brady is a world leader in complete identification solutions that help companies improve productivity, performance, safety and security. The stock carries a Zacks Rank of 2 at present and has a VGM Score of B.
The Zacks Consensus Estimate of $4.35 per share for Brady’s fiscal 2025 earnings has moved 10 cents north in the past 60 days. BRC surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 6.7%.
Get the rest of the stocks on the list and start putting this and other ideas to the test. It can all be done with the Research Wizard stock picking and back-testing software.
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.
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.
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4 Stocks Worth Buying Now on Solid Net Profit Margin
Investors focus on businesses that consistently generate profits, and net profit margin is a key metric for assessing profitability. A higher net margin indicates a company's efficiency in converting sales into actual profits, providing insights into its operational effectiveness and the challenges it faces. Companies like Steelcase Inc. (SCS - Free Report) , SPAR Group, Inc. (SGRP - Free Report) , OneSpaWorld Holdings Limited (OSW - Free Report) and Brady Corporation (BRC - Free Report) exhibit strong net profit margins.
Net Profit Margin = Net Profit / Sales * 100
Net profit represents the amount a company retains after all costs, interest, depreciation, taxes, and other expenses are deducted. The net profit margin can serve as a valuable indicator of a company's operational strength and cost management. Higher net profits are crucial for rewarding stakeholders and attracting skilled employees, which ultimately enhances business value. Additionally, a higher net profit margin compared to competitors provides a competitive edge.
Pros and Cons of Net Profit Margin
Net profit margin offers investors clarity on a company’s business model, including its pricing policy, cost structure and manufacturing efficiency. A strong net profit margin is preferred by all types of investors. However, this metric has its limitations. It varies significantly across industries, and while net income is crucial in traditional sectors, it is less relevant for technology companies. Differences in accounting treatments, particularly for non-cash expenses like depreciation and stock-based compensation, can complicate comparisons.
Moreover, companies that grow through debt rather than equity funding incur higher interest expenses, which can negatively impact net profit. In such cases, the net profit margin becomes less effective for evaluating performance. Despite these challenges, net profit margin remains a fundamental measure for understanding a company's profitability and operational efficiency.
The Winning Strategy
A healthy net profit margin and solid EPS growth are the two most sought-after elements in a business model.
Apart from these, we have added a few criteria to ensure maximum returns from this strategy.
Screening Parameters
Net Margin 12 months – Most Recent (%) greater than equal to 0: High net profit margin indicates solid profitability.
Percentage Change in EPS F(0)/(F-1) greater than equal to 0: It indicates earnings growth.
Average Broker Rating (1-5) equal to 1: A rating of #1 indicates brokers’ extreme bullishness on the stock.
Zacks Rank less than or equal to 2: Stocks with a Zacks Rank #1 (Strong Buy) or 2 (Buy) generally perform better than their peers in all types of market environments. You can see the complete list of today’s Zacks #1 Rank stocks here.
VGM Score of A or B: Our research shows that stocks with a VGM Score of A or B, when combined with a Zacks Rank #1 or 2, offer the best upside potential.
Here we discuss our four picks from the 27 stocks that qualified the screen:
Steelcase is a designer and manufacturer of products used to create high-performance work environments. Its product portfolio includes furniture systems, seating, storage, desks, casegoods, interior architectural products, technology products and related products and services. The stock currently sports a Zacks Rank of 1 and has a VGM Score of B.
The Zacks Consensus Estimate for Steelcase’s fiscal 2025 earnings has been revised upward by 8 cents to $1.00 per share in the past 30 days. Steelcase surpassed the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 57.1%.
SPAR Group is a supplier of in-store merchandising and marketing services, and premium incentive marketing services throughout the United States and Canada. The stock sports a Zacks Rank of 1 at present and has a VGM Score of B.
The Zacks Consensus Estimate for SPAR Group’s 2024 earnings has been revised upward to 31 cents per share from 6 cents in the past 60 days. SGRP surpassed the Zacks Consensus Estimate thrice in the trailing four quarters while missing the same on one occasion, the average surprise being 418.8%.
OneSpaWorld is a provider and innovator in the fields of wellness, beauty, rejuvenation and transformation on cruise ships and on land. The stock currently carries a Zacks Rank of 2 and has a VGM Score of A.
The Zacks Consensus Estimate for OneSpaWorld’s 2024 earnings has been revised upward by 3 cents to 81 cents per share in the past 60 days. OSW surpassed the Zacks Consensus Estimate thrice in the trailing four quarters while missing the same on one occasion, the average surprise being 4.7%.
Brady is a world leader in complete identification solutions that help companies improve productivity, performance, safety and security. The stock carries a Zacks Rank of 2 at present and has a VGM Score of B.
The Zacks Consensus Estimate of $4.35 per share for Brady’s fiscal 2025 earnings has moved 10 cents north in the past 60 days. BRC surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 6.7%.
Get the rest of the stocks on the list and start putting this and other ideas to the test. It can all be done with the Research Wizard stock picking and back-testing software.
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/.