Chicago, IL – October 29, 2024 – Stocks in this week’s article are Vertiv Holdings Co. VRT, Limbach Holdings, Inc. LMB, Atour Lifestyle Holdings Ltd. ATAT and Catalyst Pharmaceuticals, Inc. CPRX.
The primary purpose of a business is to generate profits that can be reinvested for its expansion or utilized for rewarding shareholders. Net profit margin is an effective tool to measure the profits reaped by a business.
A higher net margin underlines a company’s efficiency in translating sales into actual profits. Moreover, this metric gives insight into how well a company is run and the headwinds weighing on it. Vertiv Holdings Co., Limbach Holdings, Inc., Atour Lifestyle Holdings Ltd. and Catalyst Pharmaceuticals, Inc. boast solid profit margins.
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 of a company’s operations and its 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 the value of a business.
Moreover, a higher net profit margin compared with its peers provides a company with a competitive edge.
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 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.
A healthy net profit margin and solid EPS growth are the two most sought-after elements in a business model.
Apart from these, we have added a few criteria to ensure maximum returns from this strategy.
VGM Score of A or B: Our research shows that stocks with a VGM Score of A or B, when combined with a Zacks Rank #1 or 2, offer the best upside potential.
Here, we have picked four stocks — Vertiv Holdings, Limbach Holdings, Atour Lifestyle Holdings and Catalyst Pharmaceuticals — from the 28 stocks that qualified the screening.
Vertiv Holdings provides digital infrastructure and continuity solutions. It offers hardware, software, analytics and ongoing services. The stock sports a Zacks Rank of 1 at present and has a VGM Score of B.
The Zacks Consensus Estimate for Vertiv’s 2024 earnings has been revised upward by 11 cents to $2.69 per share over the past seven days. VRT surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 10.1%.
Limbach provides building systems. The company engineers, constructs and services the mechanical, plumbing, air conditioning, heating, building automation, electrical and control systems. The stock sports a Zacks Rank #1 and has a VGM Score of B at present.
The Zacks Consensus Estimate for Limbach’s 2024 earnings has been revised upward by 6 cents to $2.43 per share in the past 60 days. LMB surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 67.9%.
Atour Lifestyle Holdings is the largest upper-midscale hotel chain in China. The stock sports a Zacks Rank #1 and has a VGM Score of B.
The Zacks Consensus Estimate for Atour Lifestyle Holdings’ 2024 earnings has been revised a penny north in the past 30 days and currently stands at $1.23 per share. ATAT surpassed the Zacks Consensus Estimate thrice in the trailing four quarters while matching the same on one occasion, the average surprise being 9.1%.
Catalyst Pharmaceuticals is a commercial-stage biopharmaceutical company, focused on the development and commercialization of therapies targeting rare and difficult-to-treat diseases. At present, the stock sports a Zacks Rank #1 and has a VGM Score of B.
The Zacks Consensus Estimate for Catalyst Pharmaceuticals’ 2024 earnings has been revised upward by 3 cents to $1.92 per share in the past 60 days. CPRX surpassed the Zacks Consensus Estimate thrice in the trailing four quarters while matching the same on one occasion, the average surprise being 13.9%.
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For the rest of this Screen of the Week article please visit Zacks.com at: https://www.zacks.com/stock/news/2358388/pick-these-4-solid-net-profit-margin-stocks-to-boost-portfolio-return
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