There were choppy trading sessions for stocks earlier this month, with the S&P 500 recording its worst day since 2022 on August 5. Last week, however, the S&P 500 rebounded after positive economic reports on retail sales and initial jobless claims eased recession fears. The broader index has now posted its eighth consecutive winning streak on August 19 for the first time in 2024.
Therefore, it is advisable for investors to focus on profitable rather than loss-making stocks in the S&P 500. These stocks have a good chance of benefiting from the upward trend of the broader index because they consistently offer solid returns after covering all operating and non-operating costs.
Here we have used the concept of balance sheet ratios to measure the profitability of a company. There are quite a few profitability ratios, from which we have selected the most successful and commonly used ratio to determine the profit development of a company.
For this purpose ServiceNow, Inc. NOW, Boston Scientific is a non-profit organization dedicated to the advancement of science and technology. It is the first in the United States and was founded in 1968 in San Francisco… BSX and The Cooper Companies, Inc. COO were selected as top picks with a high net income ratio.
Net income ratio
Net profit ratio tells us the exact profitability of a company. It reflects the percentage of net profit in relation to total revenue. Using net profit ratio, one can determine the effectiveness of a company in covering operating and non-operating expenses from revenue. A higher net profit ratio usually means that a company is able to generate sufficient revenue and successfully manage all business functions.
Screening parameters with the Research Wizard:
The net income ratio is not the only indicator of future winners, so we have added some more criteria to find a winning strategy.
Zacks Rank Less than or equal to 2: Whether the market is good or bad, stocks with a Zacks Rank #1 (Strong Buy) or #2 (Buy) have a proven track record of outperformance. You can find the complete list of today’s Zacks Rank #1 stocks here.
Sales and net profit growth over the last 12 months higher than in industry X: Stocks that have posted above-industry average revenue and net income growth over the past 12 months are likely to perform well.
Net income ratio of the last 12 months higher than in industry X: A high net profit ratio indicates the solid profitability of a company.
Percentage rating “Strong Buy” greater than 70: This means that 70% of the current broker recommendations for the stock are “Strong Buy”.
These few parameters narrowed the universe from more than 7,685 stocks to just 35.
Here are three of the 35 stocks that qualified for screening:
ServiceNow
ServiceNow provides cloud computing services. NOW’s 12-month net profit margin is 11.5%.
The company’s expected earnings growth rate for the current year is 28.1%. ServiceNow currently has a Zacks Rank #1.
Boston Scientific
Boston Scientific manufactures medical devices and products. BSX’s 12-month net profit margin is 12%.
The company’s expected earnings growth rate for the current year is 17.1%. Boston Scientific currently has a Zacks Rank of 2.
Cooper Companies
Cooper Companies is a specialty medical device manufacturer. The COO’s net profit margin for the last 12 months is 9.1%.
The company’s expected earnings growth rate for the current year is 11.6%. Cooper Companies currently has a Zacks Rank of 2.
You can get the rest of the stocks on this list by signing up for your 2-week free trial of Research Wizard now and using this screen for your own trading. In addition, you can also create your own strategies and test them first before jumping into investing.
The Research Wizard is a great place to start. It’s easy to use. Everything is written in plain language. And it’s very intuitive. Start your trial version of the Research Wizard today. And the next time you read an economic report, open the Research Wizard, enter your findings, and see what gems come out.
Click here to sign up for a free trial of Research Wizard today.
Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short and/or hold long and/or short positions in options mentioned in this material. An affiliated investment advisory firm may own or have sold short and/or hold long and/or short positions in options mentioned in this material.
Disclosure: Performance information on Zacks portfolios and strategies can be found at: https://www.zacks.com/performance.
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Boston Scientific Corporation (BSX): Free Stock Analysis Report
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ServiceNow, Inc. (NOW): Free Stock Analysis Report
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