Interested in the market's largest companies? We ran a screen on the 200 largest companies by market cap, which we refer to as "mega-cap stocks," for those with strong profitability and sales trends.
We began by screening for those with strong profitability compared to industry peers, with higher gross, operating, and pretax margins than their industry averages by at least 5% on each margin. This indicates that these companies are taking a greater percentage of their revenues as profits, and they also have stronger control over their cost structures.
We then screened for those stocks with strong sales trends, comparing growth in revenue to growth in accounts receivable over the last year. Since accounts receivable is the portion of revenue not yet received, and there is no guarantee the money will ever be received, the smaller the portion of revenue made up of receivables the healthier the company's revenue.
We screened for stocks seeing faster growth in revenue than accounts receivable year-over-year, as well as accounts receivable comprising a smaller portion of current assets over the same time period.
Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the 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 poised to outperform? Use this list as a starting point for your own analysis.
List sorted by increase in revenue over the last year.
1. Companhia de Bebidas Das Americas (AMBEV) (ABV): Engages in the production, distribution, and sale of beer, draft beer, carbonated soft drinks, malt, and other non-alcoholic and non-carbonated products in the Americas. Market cap at $120.95B, most recent closing price at $39.12. TTM gross margin at 67.62% vs. industry average at 59.19%. TTM operating margin at 40.13% vs. industry average at 23.66%.TTM pretax margin at 41.31% vs. industry average at 22.91%. Revenue grew by 10.27% during the most recent quarter ($7,235.7M vs. $6,562.1M y/y). Accounts receivable grew by -0.47% during the same time period ($3,746.8M vs. $3,764.6M y/y). Receivables, as a percentage of current assets, decreased from 32.02% to 26.22% during the most recent quarter (comparing 3 months ending 2012-03-31 to 3 months ending 2011-03-31).
2. Monsanto Co. (MON): Provides agricultural products for farmers in the United States and internationally. Market cap at $38.45B, most recent closing price at $72.25. TTM gross margin at 56.43% vs. industry average at 37.23%. TTM operating margin at 22.99% vs. industry average at 16.93%.TTM pretax margin at 21.8% vs. industry average at 15.95%. Revenue grew by 14.94% during the most recent quarter ($4,748M vs. $4,131M y/y). Accounts receivable grew by 0.47% during the same time period ($3,002M vs. $2,988M y/y). Receivables, as a percentage of current assets, decreased from 34.79% to 29.95% during the most recent quarter (comparing 3 months ending 2012-02-29 to 3 months ending 2011-02-28).
3. Canadian National Railway Company (CNI): Engages in the rail and related transportation business in North America. Market cap at $35.8B, most recent closing price at $83.02. TTM gross margin at 46.76% vs. industry average at 36.65%. TTM operating margin at 37.11% vs. industry average at 26.93%.TTM pretax margin at 37.66% vs. industry average at 23.89%. Revenue grew by 12.57% during the most recent quarter ($2,346M vs. $2,084M y/y). Accounts receivable grew by -0.13% during the same time period ($769M vs. $770M y/y). Receivables, as a percentage of current assets, decreased from 44.92% to 40.62% during the most recent quarter (comparing 3 months ending 2012-03-31 to 3 months ending 2011-03-31).
4. NextEra Energy, Inc. (NEE): Engages in the generation, transmission, distribution, and sale of electric energy in the United States and Canada. Market cap at $27.38B, most recent closing price at $65.52. TTM gross margin at 34.66% vs. industry average at 26.27%. TTM operating margin at 24.68% vs. industry average at 17.62%.TTM pretax margin at 18.19% vs. industry average at 12.44%. Revenue grew by 7.56% during the most recent quarter ($3,371M vs. $3,134M y/y). Accounts receivable grew by -8.24% during the same time period ($1,837M vs. $2,002M y/y). Receivables, as a percentage of current assets, decreased from 44.3% to 36.06% during the most recent quarter (comparing 3 months ending 2012-03-31 to 3 months ending 2011-03-31).
*Profitability and accounting data sourced from Google Finance, all other data sourced from Finviz.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
