Investing
3 Top Profitable Stocks to Buy Banking on Net Income Ratio
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Investors should look for companies that offer solid returns even after meeting all operating and non-operating expenses. Thus, we have used the concept of accounting ratios to determine a company’s profitability. There is a variety of profitability ratios, from which we have chosen the most successful and often used profitability metric to evaluate a company’s bottom-line performance.
To that end, Perdoceo Education PRDO, Suzano SUZ and Aehr Test Systems AEHR have been selected as the top picks with a high net income ratio.
Net Income Ratio
The net income ratio gives us the exact profitability level of a company. It reflects the percentage of net income to total sales revenues. Using the 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
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: 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 14.
Here are three of the 14 stocks that qualified for the screening:
Perdoceo Education provides educational services. The 12-month net profit margin of PRDO is 17.5%.
Suzano is a producer of eucalyptus pulp as well as paper. The 12-month net profit margin of SUZ is 17.5%.
Aehr Test Systems develops, manufactures and sells systems that are designed to reduce the cost of testing DRAMs and other memory devices. The 12-month net profit margin of AEHR is 22.4%.
Aehr Test Systems (AEHR): Free Stock Analysis Report
Suzano S.A. Sponsored ADR (SUZ): Free Stock Analysis Report
Perdoceo Education Corporation (PRDO): Free Stock Analysis Report
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