Investors should look for companies that offer sturdy returns even after meeting all operating and non-operating costs. They should always seek a profitable company over a loss-making one.
Hence, 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.
To that end, iRadimed IRMD, PulteGroup PHM and NVIDIA NVDA have been selected as the top picks with a high net income ratio.
Net Income Ratio
Net income ratio gives 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 business functions.
Screening Parameters
Net income ratio is not the only indicator of future winners. So, we have added a few more criteria to arrive at a winning strategy.
Zacks Rank Equal to #1: 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 7,685 stocks to only 12.
Here are three of the 12 stocks that qualified the screening:
iRadimed engages in developing, manufacturing, marketing and distributing magnetic resonance imaging compatible products. The 12-month net profit margin of IRMD is 24.5%.
PulteGroup engages in homebuilding and financial services businesses, primarily in the United States. The 12-month net profit margin of PHM is 16.4%.
NVIDIA is the worldwide leader in visual computing technologies. The 12-month net profit margin of NVDA is 213.2%.
NVIDIA Corporation (NVDA): Free Stock Analysis Report
PulteGroup, Inc. (PHM): Free Stock Analysis Report
iRadimed Corporation (IRMD): Free Stock Analysis Report
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