Historically, August has been a volatile month for the stock market, but this year it has relatively begun on a steady note. Banking on this optimism, investors should focus on companies that consistently generate strong profits after covering both operating and non-operating expenses.
These companies are generally better positioned to capitalize on favorable market conditions than those that incur losses. To assess a company’s profitability, investors often rely on profitability ratios, which help measure its ability to deliver consistent and sustainable earnings.
On that note, Micron Technology, Inc. MU, BrightSpring Health Services, Inc. BTSG and Custom Truck One Source, Inc. CTOS stand out as leading profitable stocks, supported by strong net income ratios and promising growth prospects.
Why the Net Income Ratio Matters to Investors
The net income ratio is a key indicator of a company’s overall profitability. It reflects the percentage of net income relative to total sales revenues. Using the net income ratio, one can assess a firm’s ability to cover operating and non-operating expenses with revenues. A higher net income ratio usually implies a company’s ability to generate sufficient revenue and manage all business functions effectively.
Stock Screening Criteria Used in 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 13.
Here are three of the 13 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 55.9%. Micron’s expected earnings growth rate for the current year is 791% (read more: 2 AI Infrastructure Stocks That Could Outperform NVIDIA).
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