Do you prefer investing in companies with strong track records of growth, backed by continued profitability? If so, we ran a screen you might find interesting.
The Net Margin is a profitability metric that illustrates, by percentage, how much of every dollar earned gets turned into a bottom line profit. This is just one of many profitability metrics used by investors and analysts to better understand what the company is being left with at the end of the day. Generally, a firm that can expand its net profit margins over a period of time will see its stock price rise as well due to the trend of increasing profitability. Net Margin = Net Income/Total Revenue
Return on Equity [ROE] is one way to identify great potential names relative to profitability. This ratio illustrates the percentage return on shareholder equity. As well, this metric segments the company into operational efficiency, asset use efficiency, and financial leverage. Why does this matter? Simply put, it allows investors to get a real picture of how the company is generating these returns and helps identify parts of the company that may be underperforming.
We first looked for large cap stocks. We then looked for companies that analysts rate as "Buy" or "Strong Buy" (mean recommendation < 3). Next, we then screened for businesses that have strong bottom line profitability (Net Margin [TTM]>10%)(ROE [TTM]>30%). We did not screen out any sectors.
Do you think these large-cap stocks will break through to new highs? Use our list to help with your own analysis.
1) Continental Resources Inc. (CLR)
| Sector: | Basic Materials |
| Industry: | Independent Oil & Gas |
| Market Cap: | $13.19B |
| Beta: | 1.80 |
Continental Resources Inc. has a Analysts' Rating of 2.40 and Net Margin of 30.53% and Return on Equity of 30.90%. The short interest was 12.34% as of 06/01/2012. Continental Resources, Inc. engages in the exploration, development, and production of crude oil and natural gas primarily in the north, south, and east regions of the United States. The company primarily sells its oil and natural gas production to end users, as well as to midstream marketing companies or oil refining companies at the lease. As of December 31, 2011, its estimated proved reserves were 508.
2) Cummins Inc. (CMI)
| Sector: | Industrial Goods |
| Industry: | Diversified Machinery |
| Market Cap: | $18.63B |
| Beta: | 1.98 |
Cummins Inc. has a Analysts' Rating of 2.20 and Net Margin of 11.02% and Return on Equity of 36.04%. The short interest was 2.60% as of 06/01/2012. Cummins Inc. designs, manufactures, distributes, and services diesel and natural gas engines, and engine-related component products worldwide. It operates in four segments: Engine, Components, Power Generation, and Distribution. The Engine segment offers a range of diesel and natural gas powered engines under the Cummins and other customer brand names for the heavy-and medium-duty truck, bus, recreational vehicle, light-duty automotive, agricultural, construction, mining, marine, oil and gas, rail, and governmental equipment markets.
3) Coach, Inc. (COH)
| Sector: | Consumer Goods |
| Industry: | Textile - Apparel Footwear & Accessories |
| Market Cap: | $19.38B |
| Beta: | 1.62 |
Coach, Inc. has a Analysts' Rating of 2.00 and Net Margin of 21.34% and Return on Equity of 53.78%. The short interest was 1.73% as of 06/01/2012. Coach, Inc. designs and markets accessories and gifts for women and men in the United States and internationally. It primarily offers handbags, women's and men's bag, accessories, business cases, footwear, wearables, jewelry, sunwear, travel bags, watches, and fragrance products. The company's accessories, include money pieces, wristlets, cosmetic cases, wallets, card cases, time management and electronic accessories, key rings, charms, and women's and men's belts; business cases, such as computer bags, messenger-style bags, and totes; wearables comprise jackets, sweaters, gloves, hats, and scarves; jewelry consisting of bangle bracelets, necklaces, rings, and earrings; and luggage and related accessories, such as travel kits and valet trays.
4) Energy Transfer Equity, L.P. (ETE)
| Sector: | Basic Materials |
| Industry: | Oil & Gas Pipelines |
| Market Cap: | $10.17B |
| Beta: | 0.75 |
Energy Transfer Equity, L.P. has a Analysts' Rating of 2.00 and Net Margin of 16.25% and Return on Equity of 30.74%. The short interest was 1.18% as of 06/01/2012. Energy Transfer Equity, L.P. owns and operates a diversified portfolio of energy assets in the natural gas, natural gas liquids (NGL), and propane sectors in the United States. The company sells natural gas to electric utilities, independent power plants, local distribution companies, industrial end-users, and other marketing companies. It owns and operates approximately 8,300 miles of natural gas transportation pipelines and 3 natural gas storage facilities located in the state of Texas; and approximately 2,880 miles of interstate natural gas pipeline.
5) Discover Financial Services (DFS)
| Sector: | Financial |
| Industry: | Credit Services |
| Market Cap: | $17.56B |
| Beta: | 1.47 |
Discover Financial Services has a Analysts' Rating of 2.00 and Net Margin of 33.35% and Return on Equity of 30.10%. The short interest was 0.81% as of 06/01/2012. Discover Financial Services, a bank holding company, offers direct banking and payment services in the United States. It operates in two segments, Direct Banking and Payment Services. The Direct Banking segment offers Discover card-branded credit cards to individuals and small businesses that are accepted on the Discover Network.
6) Baxter International Inc. (BAX)
| Sector: | Healthcare |
| Industry: | Medical Instruments & Supplies |
| Market Cap: | $27.87B |
| Beta: | 0.49 |
Baxter International Inc. has a Analysts' Rating of 2.20 and Net Margin of 16.20% and Return on Equity of 33.32%. The short interest was 0.73% as of 06/01/2012. Baxter International Inc., through its subsidiaries, develops, manufactures, and markets products for people with hemophilia, immune disorders, infectious diseases, kidney disease, trauma, and other chronic and acute medical conditions. The company operates in two segments, BioScience and Medical Products. The BioScience segment processes recombinant and plasma-based proteins to treat hemophilia and other bleeding disorders; plasma-based therapies to treat immune deficiencies, alpha-1 antitrypsin deficiency, burns and shock, and other chronic and acute blood-related conditions; products for regenerative medicine, such as biosurgery products; and certain vaccines.
7) Ford Motor Co. (F)
| Sector: | Consumer Goods |
| Industry: | Auto Manufacturers - Major |
| Market Cap: | $40.30B |
| Beta: | 2.36 |
Ford Motor Co. has a Analysts' Rating of 2.10 and Net Margin of 14.06% and Return on Equity of 200.27%. The short interest was 3.97% as of 06/01/2012. Ford Motor Company engages in the development, manufacture, distribution, and service of vehicles and related parts worldwide. The company operates through two sectors, Automotive and Financial Services. The automotive sector offers vehicles primarily under the Ford and Lincoln brand names. This sector markets cars, trucks, and parts through retail dealers in North America, and through distributors and dealers outside North America.
8) CF Industries Holdings, Inc. (CF)
| Sector: | Basic Materials |
| Industry: | Agricultural Chemicals |
| Market Cap: | $11.22B |
| Beta: | 1.15 |
CF Industries Holdings, Inc. has a Analysts' Rating of 2.40 and Net Margin of 28.35% and Return on Equity of 34.98%. The short interest was 2.92% as of 06/01/2012. CF Industries Holdings, Inc., through its subsidiary, CF Industries, Inc., manufactures and distributes nitrogen and phosphate fertilizer products, serving agricultural and industrial customers worldwide. It operates in two segments, Nitrogen and Phosphate.
9) Gilead Sciences Inc. (GILD)
| Sector: | Healthcare |
| Industry: | Biotechnology |
| Market Cap: | $37.83B |
| Beta: | 0.45 |
Gilead Sciences Inc. has a Analysts' Rating of 1.90 and Net Margin of 29.51% and Return on Equity of 39.13%. The short interest was 1.76% as of 06/01/2012. Gilead Sciences, Inc., a biopharmaceutical company, discovers, develops, and commercializes human therapeutics for the treatment of life threatening diseases worldwide. Its products include Atripla, Truvada, Viread, Complera/Eviplera, and Emtriva for the treatment of human immunodeficiency virus (HIV) infection in adults; Viread and Hepsera oral formulations for the treatment of chronic hepatitis B; Letairis, an oral formulation for pulmonary arterial hypertension; Ranexa, a tablet for chronic angina; Lexiscan/Rapiscan, a test that detects and characterizes coronary artery disease; Cayston, an inhaled antibiotic for the treatment of respiratory systems in cystic fibrosis patients; Tamiflu, a capsule for the treatment and prevention of influenza A and B. The company also provides other products, such as AmBisome, an antifungal agent to treat serious invasive fungal infections; Vistide, an antiviral medication for the treatment of cytomegalovirus retinitis in patients with AIDS; and Macugen, an anti-angiogenic oligonucleotide to treat neovascular macular degeneration.
*Company profiles were sourced from Finviz.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
