5 Profitable Stocks With Midas Touch

The best possible way to determine a company’s ability to effectively manage all its business-related costs is by using profitability analysis. Although a profitable company with weak fundamentals may impress investors, multiple studies highlighted that a profitable entity generally provides better returns than a loss-making one.

Here, we have used the concept of accounting ratios to evaluate a company’s profitability. There is a variety of profitability ratios, from which we have chosen the most common and successful profitability metric to determine the bottom-line performance of a company.

Net Income Ratio

Net income ratio gives us the exact profitability level of a company. It reflects the percentage of net income to total sales revenues. Using net income ratio, one can determine a company’s effectiveness to pay for its operating and non-operating expenses from its revenues. A higher net income ratio usually implies a company’s ability to generate ample revenues and successfully manage all its business functions.

Screening Parameters

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: Only Zacks Rank #1 (Strong Buy) stocks are allowed. With the Zacks Rank proving itself to be one of the best rating systems out there, this is a great way to start things off. You can see the complete list of today’s Zacks #1 Rank stocks here.

12-Month Trailing Sales and Net Income Growth Higher than X Industry: Stocks that possess higher sales and net income growth in the last 12 months showcase better financial performance.

12-Month Trailing Net Income Ratio Higher than X Industry: High net income ratio indicates a company’s solid profitability.

% Rating Strong Buy greater than 70%: This indicates that 70% of the analysts covering these stocks are optimistic.

These few parameters narrowed down the universe of over 7,864 stocks to only 10.

Here are five of the 10 stocks that qualified the screen:

Malibu Boats, Inc. (NASDAQ:MBUU) is a designer, manufacturer, distributor, marketer and seller of recreational powerboats. It has an average four-quarter positive earnings surprise of 13.8%.

MasTec, Inc. (NYSE:MTZ) is an infrastructure construction company. It has an average four-quarter positive earnings surprise of 28.1%.

Orbotech Ltd. (NASDAQ:ORBK) is a provider of yield-enhancing and process-enabling solutions. It has an average four-quarter positive earnings surprise of 1.4%.

Arbor Realty Trust, Inc. (NYSE:ABR) is a diversified portfolio of structured finance assets in the commercial real estate markets. It has an average four-quarter positive earnings surprise of 31.9%.

Triton International Limited (NYSE:TRTN) is involved in the acquisition, leasing, re-leasing, and sale of various intermodal containers. It has an average four-quarter positive earnings surprise of 3.9%.

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.

The Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.

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Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.

Disclosure: Performance information for Zacks’ portfolios and strategies are available at: https://www.zacks.com/performance.

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