As we move into May, investors should prefer companies that deliver solid returns after covering both operating and non-operating costs. As a result, consistently profitable businesses tend to be more appealing than those operating at a loss. To assess profitability, investors use accounting ratios that highlight the key measures of a company’s bottom-line performance.
With that in mind, Micron Technology, Inc. MU and Vicor Corporation VICR emerged as the top profitable picks, backed by robust net income ratios and significant upside potential. Incidentally, Micron and Vicor’s shares have soared 574.3% and 563.8%, respectively, over the past year.
Net Income Ratio: A Simple Guide for Investors
The net income ratio indicates a company’s exact level of profitability. It reflects the percentage of net income relative to total sales revenues. Using the net income ratio, one can determine a firm’s effectiveness in covering operating and non-operating expenses from revenues. A higher net income ratio usually implies a company’s ability to generate sufficient revenues and manage all business functions effectively.
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 18.
Here are two of the 18 stocks that qualified for the screening:
Micron Technology
Micron Technology is a global provider of memory and storage products. MU’s 12-month net profit margin is 41.5%.
Vicor
Vicor develops and sells modular power components and systems that convert electrical power for electronic devices across global markets. VICR’s 12-month net profit margin is nearly 29%.
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Micron Technology, Inc. (MU): Free Stock Analysis Report
Vicor Corporation (VICR): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).