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Astute investors should search for companies with strong returns after costs, favoring profitable over loss-making ones. We assess profitability using accounting ratios, focusing on the most effective metrics to evaluate a firm’s performance.
To that end, AppLovin Corporation APP, Silvercorp Metals Inc. SVM and Powell Industries, Inc. POWL have been selected as the top picks with a high net income ratio.
Net Income Ratio
The net income ratio gives us a company's exact profitability level. It reflects the percentage of net income to total sales revenues. Using the net income ratio, one can determine a firm’s effectiveness in meeting 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 Using Research Wizard:
The 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: A 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 the universe of more than 7,685 stocks to only 11.
Here are three of the 11 stocks that qualified for the screening:
AppLovin Corporation
AppLovin Corporation develops a software platform to boost advertisers' marketing and content monetization efforts in the United States and globally. The 12-month net profit margin of APP is 26.9%.
Silvercorp Metals
Silvercorp Metals and its subsidiaries acquire, explore, develop and mine mineral properties. The 12-month net profit margin of SVM is 23.1%.
Powell Industries
Powell Industries designs and develops custom equipment and offers related services. The 12-month net profit margin of POWL is 14.8%.
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 test them first before taking the investment plunge.