Do you like to invest with a stock's trading momentum? If so, here's a list you may find interesting.
We began by screening the medical devices industry for stocks with positive market sentiment, rallying above their 20-day, 50-day, and 200-day moving averages.
Then to analyze these companies' profitability, we ran DuPont analysis on the names. DuPont analyzes profitability by breaking up return on equity (net income/equity) into three components:
= (Net Profit/Equity)
= (Net profit/Sales)*(Sales/Assets)*(Assets/Equity)
= (Net Profit margin)*(Asset turnover)*(Leverage ratio)
Because increases in net margin and asset turnover are considered good things, DuPont focuses on companies with these positive characteristics: Increasing ROE along with,
•Decreasing leverage, (i.e. decreasing Asset/Equity ratio)
•Improving asset use efficiency (i.e. increasing Sales/Assets ratio)
•Improving net profit margin (i.e. increasing Net Income/Sales ratio)
Those companies that pass DuPont are seeing positive trends in the sources of their increasing profitability, which adds further weight to the idea that the names are profitable.
For an interactive version of this chart, click on the image below. Analyst ratings sourced from Zacks Investment Research.
Tool provided by Kapitall.
Do you think these stocks will continue to rally higher? Use this list as a starting point for your own analysis.
List sorted by distance above 200-day moving average.
1. Cyberonics Inc. (NASDAQ:CYBX): Engages in the design, development, manufacture, sale, and marketing of implantable medical devices that provide vagus nerve stimulation (VNS) therapy for the treatment of refractory epilepsy and treatment-resistant depression. Market cap at $1.19B, most recent closing price at $44.48. The stock is trading 0.85% above its 20-day moving average (MA), 3.57% above its 50-day MA, and 21.80% above its 200-day MA. MRQ (most recent quarter) net profit margin at 18.5% vs. 14.53% y/y. MRQ sales/assets at 0.272 vs. 0.242 y/y. MRQ assets/equity at 1.155 vs. 1.205 y/y.
2. Utah Medical Products Inc. (NASDAQ:UTMD): Produces and markets medical devices for the healthcare industry primarily in the United States and Europe. Market cap at $123.2M, most recent closing price at $33.56. The stock is trading 0.07% above its 20-day moving average, 0.36% above its 50-day MA, and 13.16% above its 200-day MA. MRQ net profit margin at 24.89% vs. 19.73% y/y. MRQ sales/assets at 0.14 vs. 0.083 y/y. MRQ assets/equity at 1.796 vs. 2.133 y/y.
3. Steris Corp. (NYSE:STE): Develops, manufactures, and markets infection prevention, contamination control, microbial reduction, and surgical support products and services to healthcare, pharmaceutical, scientific, research, industrial, and governmental customers worldwide. Market cap at $1.82B, most recent closing price at $32.54. The stock is trading 4.87% above its 20-day moving average, 5.90% above its 50-day MA, and 8.17% above its 200-day MA. MRQ net profit margin at 11.32% vs. 10.32% y/y. MRQ sales/assets at 0.278 vs. 0.265 y/y. MRQ assets/equity at 1.711 vs. 1.811 y/y.
*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.