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There are multiple ways to identify companies with strong fundamentals; sales and profit margins are the critical factors for the health of the company. Profit Margin is calculated as net income divided by revenues, and it is a key indicator of a company's pricing strategies and cost cutting measures. An increase in profit margins shows the company is increasing operating efficiency by controlling costs and making more money on each unit sale. Increase in sales at the expense of profits and increase in profits with decrease in sales are not good for the growth of the company.

In this article, I will focus on the top 10 companies with increasing sales and increasing margins across various industries. Even though profit margin is helpful when comparing stocks within similar industries, the idea is to identify top 10 companies across various industries for the portfolio diversification. Use this list as a potential starting point for your analysis. These top 10 profit margin stocks are screened based on the following criteria:

  • Security Type: Common Stock
  • Security Price: Greater than or Equal to $5.00
  • Revenue Growth (TTM vs. Prior TTM): Greater than or Equal to 20.00%
  • Operating Margin (TTM/5 Year Avg.): Highest 20%
  • Return on Sales [TTM]: Greater than or Equal to 10.00%
  • Volume (90 day Average): Greater than or Equal to 50.0K
  • Zacks Investment Research Is: Buy

* TTM = Trailing Twelve Months

The following table provides the top 10 stocks with increasing sales and profit margins:

(click to enlarge)

1. AKORN INC (AKRX): Akorn manufactures and markets diagnostic and therapeutic ophthalmic pharmaceuticals, as well as hospital drugs and injectable pharmaceuticals. Akorn has a market cap of $1.098 billion. Akorn is currently trading around $11.56, with a 52 week range of $6.00 - $13.09. Profit margin for the 12 month period is 31.41%, and profit margin for the most recent quarter is 13.45%. Revenue growth for the last quarter is 77.27% when compared to same quarter prior year. Projected EPS growth for this year is 47.71% when compared to last year. AKRX has 17.88% return on assets and 31.86% return on equity. The stock has 3.96% price performance for the year 2012.

2. SALIX PHARMACEUTICALS LTD (SLXP): Salix Pharmaceuticals is a specialty pharmaceutical company engaged in acquiring, developing and commercializing prescription drugs and medical devices used in the treatment of a variety of gastrointestinal diseases, which are those affecting the digestive tract. Salix Pharmaceuticals has a market cap of $2.877 billion. Salix Pharmaceuticals is currently trading around $48.41 with a 52 week range of $25.64 - $53.99. Profit margin for the 12 month period is 16.17% and profit margin for the most recent quarter is 21.65%. Revenue growth for the last quarter is 30.96% when compared to same quarter prior year. Projected EPS growth for this year is -9.75% when compared to last year. SLXP has 8.23% return on assets and 18.63% return on equity. The stock has 1.17% price performance for the year 2012.

3. ALEXION PHARMACEUTICALS INC (ALXN): Alexion is a biopharmaceutical company focused on serving patients with severe and ultra-rare disorders through the development and commercialization of life-transforming therapeutic products. Alexion Pharmaceuticals has a market cap of $17.067 billion. Alexion Pharmaceuticals is currently trading around $91.76 with a 52 week range of $43.78 - $95.01. Profit margin for the 12 month period is 22.38% and profit margin for the most recent quarter is 21.17%. Revenue growth for the last quarter is 45.89% when compared to same quarter prior year. Projected EPS growth for this year is 26.23% when compared to last year. ALXN has 13.93% return on assets and a 17.34% return on equity. The stock has 28.34% price performance for the year 2012.

4. POZEN INC (POZN): POZEN is a pharmaceutical company focused on transforming medicine. POZEN has a market cap of $229.0 million. POZEN is currently trading around $7.64, with a 52 week range of $2.15 - $7.95. Profit margin for the 12 month period is 48.69%, and profit margin for the most recent quarter is 84.24%. Revenue growth for the last quarter is 151% when compared to same quarter prior year. POZN has 57.7% return on assets and 66.78% return on equity. The stock has 93.42% price performance for the year 2012.

5. MITCHAM INDUSTRIES INC (MIND): Mitcham, through its subsidiaries, engages in the leasing, sale and service of geophysical and other equipment to the seismic industry worldwide. Mitcham has a market cap of $281.1 million. Mitcham is currently trading around $22.32 with a 52 week range of $9.52 - $26.76. Profit margin for the 12 month period is 21.55%, and profit margin for the most recent quarter is 27.45%. Revenue growth for the last quarter is 87.66% when compared to same quarter prior year. Projected EPS growth for this year is 31.52% when compared to last year. MIND has 13.7% return on assets and 17.99% return on equity. The stock has 2.2% price performance for the year 2012.

6. ASPEN TECHNOLOGY INC (AZPN): Aspen Technology is a provider of process optimization software solutions, which are designed to manage and optimize plant and process design, operational performance, and supply chain planning. Aspen Technology has a market cap of $1.851 billion. Aspen Technology is currently trading around $19.75 with a 52 week range of $12.61 - $21.87. Profit margin for the 12 month period is 12.6% and profit margin for the most recent quarter is 5.76%. Revenue growth for the last quarter is 33.62% when compared to same quarter prior year. Projected EPS growth for this year is 73% when compared to last year. AZPN has 7.25% return on assets and 20.19% return on equity. The stock has 13.83% price performance for the year 2012.

7. ROBBINS & MYERS INC. (RBN): Robbins & Myers is a supplier of engineered equipment and systems for critical applications in global energy, industrial, chemical and pharmaceutical markets. Robbins & Myers has a market cap of $2.194 billion. Robbins & Myers is currently trading around $49.96, with a 52 week range of $31.54 - $55.63. Profit margin for the 12 month period is 12.91% and profit margin for the most recent quarter is 14.89%. Revenue growth for the last quarter is 39.23% when compared to same quarter prior year. Projected EPS growth for this year is 49.08% when compared to last year. RBN has 8.26% return on assets and 11.3% return on equity. The stock has 2.9% price performance for the year 2012.

8. HFF INC (HF): HFF is a provider of commercial real estate and capital markets services to the United States commercial real estate industry based on transaction volume. HFF has a market cap of $585.4 million. HFF is currently trading around $15.89 with a 52 week range of $7.83 - $16.98. Profit margin for the 12 month period is 15.71% and profit margin for the most recent quarter is 16.67%. Revenue growth for the last quarter is 55.18% when compared to same quarter prior year. Projected EPS growth for this year is 9.01% when compared to last year. HF has 9.98% return on assets and 36.65% return on equity. The stock has 53.82% price performance for the year 2012.

9. MARKETAXESS HOLDINGS INC (MKTX): MarketAxess operates an electronic trading platform that allows investment industry professionals to trade corporate bonds and other types of fixed-income instruments. MarketAxess has a market cap of $1.390 billion. MarketAxess is currently trading around $36.41 with a 52 week range of $20.64 - $37.95. Profit margin for the 12 month period is 26.34% and profit margin for the most recent quarter is 25.57%. Revenue growth for the last quarter is 16.91% when compared to same quarter prior year. Projected EPS growth for this year is 18.85% when compared to last year. MKTX has 14.53% return on assets and 16% return on equity. The stock has 20.92% price performance for the year 2012.

10. ACORN ENERGY INC (ACFN): Acorn Energy is a holding company, which provides solutions for energy infrastructure asset management. Acorn Energy has a market cap of $199.0 million. Acorn Energy is currently trading around $11.21, with a 52 week range of $3.33 - $12.00. Profit margin for the 12 month period is 30.37% and profit margin for the most recent quarter is -22.13%. Revenue growth for the last quarter is 57.1% when compared to same quarter prior year. ACFN has 7.97% return on assets and 11.25% return on equity. The stock has 85.6% price performance for the year 2012.

Sources: Some of the data is sourced from Google Finance, Yahoo Finance and Fidelity.

Disclaimer: I am not a registered investment advisor and do not provide specific investment advice. The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities. Before buying or selling any stock you should do your own research and reach your own conclusion. It is up to the investors to make the correct decision after necessary research.

Source: Top 10 Stocks With Increasing Sales And Profit Margins