The Operating Profit Margin is a profitability metric often used to gauge the effectiveness of a company’s pricing strategy and operational efficiency. In particular, this ratio illustrates how much revenue is left after variable costs have been covered. The larger this profitability ratio is the better because it let’s investors know how easily a company can cover its fixed costs such as the interest expense on outstanding debt. It’s best to review a company's operating profit margin over multiple periods or over an extended aggregate period to determine its quality. The best situation would be to see a company with stable or growing margins because this means it is increasing its profitability relative to sales.
We ran a screen for companies that have continued to operate with a strong operating profit margin (X>20%) over a 1-year fiscal period. From this narrowed list we then screened for companies that have continued to outperform the S&P 500 (SPY) year to date and over the last trading week. We did not screen out any companies by sector or market capitalization.
The list ranks the companies from highest to lowest by their 1-week performance:
1. W&T Offshore Inc. (WTI)
Sector | Energy |
Industry | Oil & Gas E&P |
Market Cap | $1,323M |
Beta | 1.81 |
The company explores for and produces oil along with natural gas. The company’s 1-year fiscal Operating Margin is 23.63%. WTI has increased by 27.29% in the last week and by 0.11% YTD. The short interest was N/A as of 09/30/2011.
2. Cheniere Energy Inc. (LNG)
Sector | Energy |
Industry | Oil & Gas Refining & Marketing |
Market Cap | $475M |
Beta | -0.34 |
The company is in the process of developing and operating three onshore LNG receiving terminals and related assets in the US. The company’s 1-year fiscal Operating Margin is 35.89%. LNG has increased by 24.78% in the last week and by 3.99% YTD. The short interest was 35.20% as of 09/30/2011.
3. Seaspan Corporation. (SSW)
Sector | Industrials |
Industry | Shipping & Ports |
Market Cap | $917M |
Beta | 1.07 |
The company owns, operates, and charters container ships around the world. The company’s 1-year fiscal Operating Margin is 46.62 %. SSW has increased by 20.51% in the last week and by 10.95% YTD. The short interest was 2.50% as of 09/30/2011.
4. Brigham Exploration Company. (BEXP)
Sector | Energy |
Industry | Oil & Gas E&P |
Market Cap | $3,562M |
Beta | 3.05 |
The company explores for and develops onshore oil and natural gas reserves within the US. The company’s 1-year fiscal Operating Margin is 35.61%. BEXP has increased by 18.13% in the last week and by 11.45% YTD. The short interest was N/A as of 09/30/2011.
5. Berry Petroleum Co. (BRY)
Sector | Energy |
Industry | Oil & Gas E&P |
Market Cap | $2,256M |
Beta | 2.69 |
The company explores for, develops, and produces crude oil and natural gas. The company’s 1-year fiscal Operating Margin is 20.37%. BRY has increased by 17.22% in the last week and only fallen by -3.04% YTD. The short interest was 8.60% as of 09/30/2011.
6. Hornbeck Offshore Services, In. (HOS)
Sector | Energy |
Industry | Oil & Gas Equipment & Services |
Market Cap | $827M |
Beta | 2.12 |
The company operates offshore supply vessels that offer logistics support and specialty services for oil and gas exploration operations. The company’s 1-year fiscal Operating Margin is 26.67%. HOS has increased by 16.44% in the last week and by 47.22% YTD. The short interest was N/A as of 09/30/2011.
7. Helmerich & Payne, Inc. (HP)
Sector | Energy |
Industry | Oil & Gas Drilling |
Market Cap | $5,196M |
Beta | 1.25 |
The company is a contract driller of oil and gas wells for others. The company’s 1-year fiscal Operating Margin is 24.09 %. HP has increased by 15.61% in the last week and by 0.47 % YTD. The short interest was 6.10% as of 09/30/2011.
8. Baidu, Inc. (BIDU)
Sector | Technology |
Industry | Internet Content & Information |
Market Cap | $48,014M |
Beta | 1.52 |
The company operates the leading Chinese-based search engine online. The company’s 1-year fiscal Operating Margin is 50.02%. BIDU has increased by 15.43% in the last week and by 42.55% YTD. The short interest was N/A as of 09/30/2011.
We hope this list helps as investors do their own due diligence on companies with strong operating margins and that are currently outperforming the S&P 500 over the short-to-medium term. Last, the companies listed above were the top eight at the time according to their 1-week performance, YTD performance, and operating margin.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
