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There are tens if not hundreds of options in deciding how to look at a company’s profitability. One interesting option is comparing a company’s profitability margins to industry peers. Companies with higher margins are keeping a greater percentage of sales as profits, and they also have more control over their cost structure.

Using this tool, we ran a screen on a universe of rumored takeover/leveraged buyout (LBO) targets compiled from various sources including CNBC and Wall Street Cheat Sheet. We screened these potential takeover targets for those with high profitability, beating their industry peers on gross, operating and pretax margins.

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the top six stocks mentioned below. Analyst ratings sourced from Zacks Investment Research.‬


We also created a price-weighted index of the stocks mentioned below and monitored the performance of the list relative to the S&P 500 index over the last month. To access a complete analysis of this list's recent performance, click here.

Do you think these companies are attractive takeover targets? Use this list as a starting point for your own analysis.

List sorted by difference between gross margin and industry average.

1. The McGraw-Hill Companies, Inc. (MHP): Provides various information services for financial, educational and business information markets worldwide. Market cap of $12.74B. Takeover/LBO rumor sourced from Seeking Alpha. TTM gross margin at 61.84% vs. industry gross margin at 42.19%. TTM operating margin at 23.45% vs. industry operating margin at 16.91%. TTM pretax margin at 22.02% vs. industry pretax margin at 12.36%. The stock has gained 26.05% over the last year.

2. Advance Auto Parts Inc. (NYSE:AAP): Operates as a retailer of automotive aftermarket parts, accessories, batteries and maintenance items. Market cap of $4.94B. Takeover/LBO rumor sourced from Seeking Alpha. TTM gross margin at 52.67% vs. industry gross margin at 37.68%. TTM operating margin at 10.41% vs. industry operating margin at 9.78%. TTM pretax margin at 9.88% vs. industry pretax margin at 8.98%. The stock has gained 2.7% over the last year.

3. Iridium Communications Inc. (NASDAQ:IRDM): Provides mobile voice and data communications services through satellites to businesses. Market cap of $535.17M. Takeover/LBO rumor sourced from Seeking Alpha. TTM gross margin at 67.94% vs. industry gross margin at 50.70%. TTM operating margin at 20.22% vs. industry operating margin at 16.10%. TTM pretax margin at 17.02% vs. industry pretax margin at 14.22%. The stock is a short squeeze candidate, with a short float at 19.5% (equivalent to 17.14 days of average volume). The stock has had a couple of great days, gaining 5.79% over the last week.

4. LKQ Corp. (LKQX): Provides replacement parts, components and parts needed to repair vehicles, primarily cars and trucks in the United States and Canada. Market cap of $4.31B. Takeover/LBO rumor sourced from CNBC. TTM gross margin at 43.01% vs. industry gross margin at 32.54%. TTM operating margin at 11.65% vs. industry operating margin at 7.25%. TTM pretax margin at 10.58% vs. industry pretax margin at 6.74%. The stock has gained 32.76% over the last year.

5. Sealed Air Corporation (NYSE:SEE): Manufactures and sells packaging and performance-based materials and equipment systems worldwide. Market cap of $2.78B. Takeover/LBO rumor sourced from Seeking Alpha. TTM gross margin at 30.06% vs. industry gross margin at 23.15%. TTM operating margin at 11.71% vs. industry operating margin at 9.85%. TTM pretax margin at 6.84% vs. industry pretax margin at 6.35%. The stock has lost 20.67% over the last year.

6. Shire plc (SHPGY): Engages in the research and development, manufacture, sale and distribution of pharmaceutical products. Market cap of $18.08B. Takeover/LBO rumor sourced from Minyanville. TTM gross margin at 87.98% vs. industry gross margin at 72.52%. TTM operating margin at 26.50% vs. industry operating margin at 21.25%. TTM pretax margin at 24.29% vs. industry pretax margin at 15.15%. The stock has gained 33.82% over the last year.

7. Nordstrom Inc. (NYSE:JWN): A fashion specialty retailer, offers apparel, shoes, cosmetics and accessories for women, men and children in the United States. Market cap of $10.23B. Takeover/LBO rumor sourced from Seeking Alpha. TTM gross margin at 42.80% vs. industry gross margin at 35.35%. TTM operating margin at 11.78% vs. industry operating margin at 8.37%. TTM pretax margin at 10.57% vs. industry pretax margin at 7.03%. The stock has gained 18.55% over the last year.

8. Apollo Group Inc. (NASDAQ:APOL): Provides educational programs and services at the undergraduate, master's and doctoral levels. Market cap of $6.02B. Takeover/LBO rumor sourced from Wall St. Cheat. TTM gross margin at 62.52% vs. industry gross margin at 52.58%. TTM operating margin at 25.19% vs. industry operating margin at 21.36%. TTM pretax margin at 20.16% vs. industry pretax margin at 18.23%. The stock is a short squeeze candidate, with a short float at 8.34% (equivalent to 5.16 days of average volume). The stock has gained 29.32% over the last year.

9. Akamai Technologies, Inc. (NASDAQ:AKAM): Provides services for accelerating and improving the delivery of content and applications over the Internet in the United States and internationally. Market cap of $5.18B. Takeover/LBO rumor sourced from Seeking Alpha. TTM gross margin at 81.07% vs. industry gross margin at 68.91%. TTM operating margin at 25.25% vs. industry operating margin at 25.04%. TTM pretax margin at 26.18% vs. industry pretax margin at 17.07%. The stock has had a good month, gaining 21.19%.

10. Mattel Inc. (NASDAQ:MAT): Engages in the design, manufacture and marketing of various toy products worldwide. Market cap of $9.48B. Takeover/LBO rumor sourced from CNBC. TTM gross margin at 51.77% vs. industry gross margin at 45.09%. TTM operating margin at 15.84% vs. industry operating margin at 11.50%. TTM pretax margin at 14.54% vs. industry pretax margin at 9.37%. Offers a good dividend, and appears to have good liquidity to back it up - dividend yield at 3.29%, current ratio at 2.13, and quick ratio at 1.58. The stock has gained 19.25% over the last year.

11. American Electric Power Co., Inc. (NYSE:AEP): Engages in the generation, transmission and distribution of electric power to retail customers. Market cap of $18.65B. Takeover/LBO rumor sourced from Wall St. Cheat. TTM gross margin at 31.27% vs. industry gross margin at 27.44%. TTM operating margin at 20.26% vs. industry operating margin at 19.0%. TTM pretax margin at 16.17% vs. industry pretax margin at 14.56%. The stock has gained 13.72% over the last year.

12. Dollar Tree, Inc. (NASDAQ:DLTR): Operates discount variety stores in the United States and Canada. Market cap of $9.28B. Takeover/LBO rumor sourced from CNN Money. TTM gross margin at 38.41% vs. industry gross margin at 35.35%. TTM operating margin at 11.45% vs. industry operating margin at 8.37%. TTM pretax margin at 11.48% vs. industry pretax margin at 7.03%. After a solid performance over the last year, DLTR has pulled back during recent sessions. The stock is 5.45% below its SMA20 and 3.27% below its SMA50, but remains 15.59% above its SMA200. The stock has gained 39.01% over the last year.

13. Kohl's Corp. (NYSE:KSS): Operates department stores in the United States. Market cap of $14.98B. Takeover/LBO rumor sourced from Wall St. Cheat. TTM gross margin at 38.38% vs. industry gross margin at 35.37%. TTM operating margin at 12.49% vs. industry operating margin at 8.38%. TTM pretax margin at 10.22% vs. industry pretax margin at 7.12%. The stock has gained 6.88% over the last year.

14. Gannett Co., Inc. (NYSE:GCI): Operates as a media and marketing solutions company in the United States and internationally. Market cap of $2.67B. Takeover/LBO rumor sourced from Wall St. Cheat. TTM gross margin at 45.19% vs. industry gross margin at 42.21%. TTM operating margin at 18.88% vs. industry operating margin at 16.93%. TTM pretax margin at 14.51% vs. industry pretax margin at 12.36%. This is a risky stock that is significantly more volatile than the overall market (beta = 2.44). The stock has lost 7.65% over the last year.

15. GlaxoSmithKline plc (NYSE:GSK): Engages in the discovery, development, manufacture and marketing of pharmaceutical products, over the counter (OTC) medicines and health-related consumer products worldwide. Market cap of $110.93B. Takeover/LBO rumor sourced from Minyanville. TTM gross margin at 73.87% vs. industry gross margin at 72.50%. TTM operating margin at 22.34% vs. industry operating margin at 21.10%. TTM pretax margin at 19.73% vs. industry pretax margin at 14.66%. The stock has gained 16.86% over the last year.

16. Molex Inc. (NASDAQ:MOLX): Manufactures and sells electronic components worldwide. Market cap of $4.24B. Takeover/LBO rumor sourced from Seeking Alpha. TTM gross margin at 37.24% vs. industry gross margin at 36.61%. TTM operating margin at 12.42% vs. industry operating margin at 9.80%. TTM pretax margin at 12.10% vs. industry pretax margin at 9.94%. Offers a good dividend, and appears to have good liquidity to back it up - dividend yield at 3.31%, current ratio at 2.24, and quick ratio at 1.64. The stock has gained 21.61% over the last year.

*Profitability data sourced from Fidelity, all other data sourced from Finviz. To access the complete list of takeover targets, click here.

Source: 16 Takeover / LBO Targets With Impressive Profitability