Zacks.com Featured Highlights Include: Euronav, SYNNEX, CBIZ, The Bancorp And Metropolitan Bank
Zacks Investment Research | Feb 28, 2020 06:42AM ET
For Immediate Release
Chicago, IL – February 28, 2020 – Stocks in this week’s article are Euronav NV (NYSE:EURN) , SYNNEX Corp. (NYSE:SNX) , CBIZ, Inc. (NYSE:CBZ) , The Bancorp, Inc. (NASDAQ:TBBK) and Metropolitan Bank Holding Corp. (NYSE:MCB) .
Bet on These 5 Top-Rated Stocks with Solid Net-Profit Margins
Net profit, also referred to as the bottom line, is one of the key tools that determines the financial health of an enterprise. The metric demonstrates a company’s ability to convert per dollar sales into profits.
A low-profit margin indicates higher risks, implying that a revenue drop might dent profits, pushing the company in the red (net loss).
Net Profit Margin = Net profit/Sales* 100.
In simple terms, net profit is the amount a company retains after deducting all costs, interest, depreciation, taxes and other expenses. In fact, net profit margin can turn out to be a potent point of reference to gauge the strength in a company operations and cost-control measures.
Also, higher net profit is essential for rewarding stakeholders. Further, strength in the metric not only attracts investors but also draws well-skilled employees who eventually enhance a business’ value.
Moreover, a higher net profit margin compared with its peers provides the company a competitive edge.
Pros and Cons
Net profit margin helps investors gain clarity on a company’s business model in terms of pricing policy, cost structure and manufacturing efficiency. Hence, a strong net profit margin is preferred by all classes of investors.
However, net profit margin as an investment criterion has its own share of pitfalls. The metric varies widely from industry to industry. While net income is a key metric for investment measurement in traditional industries, it is not that important for technology companies.
In addition, the difference in accounting treatment of various items — especially non-cash expenses like depreciation and stock-based compensation — makes comparison a daunting task.
Furthermore, for companies preferring to grow with debt instead of equity funding, higher interest expenses usually weigh on net profit. In such cases, the measure is rendered ineffective, while analyzing a company’s performance.
For the rest of this Screen of the Week article please visit Zacks.com at: Zacks Investment Research
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