However, the key
to a profitability ratio isn't the number itself, but how that number compares
in relation with a company's peers or its own history.
Investing is
really about one thing and one thing only: the ability to participate alongside
the profit generating ability of a business.
You may also like: 5 Profitably Growing Dividend Stocks.
You may also like: 5 Profitably Growing Dividend Stocks.
With profits at
the very foundation of investing, it means that investors need to have a firm
grasp on the ability of a company they're investing in to turn a profit. The
best way to gauge how well a company is doing in that regard is to take a
closer look at its profitability ratios to see how that company really stacks
up. There are three profitability ratios in particular that every investor
really should know.
While there are a
number of profitability ratios that measure a company's ability to generate
profit from the sales or services it provides, one of the most important is the
net profit margin. It tells us what percentage of revenue a company keeps after
all its bills are paid. The formula is: Net Margin = (Net Income or Loss) /
Sales.
Recently, I've
published an article about stocks with high Margins. My guess is that they
have a real competitive advantage by realizing such high margins. Under the
results were many non-dividend paying companies or stocks that have recently
started to pay dividends like Apple and Blackrock.
Attached, you can
find a list of stocks with the highest net profit margin below the Dividend
Champions League. Those stocks have raised Dividends by more than 25
consecutive years.
In total, 16 stocks matched my criteria of net profit margins above 20%.
In total, 16 stocks matched my criteria of net profit margins above 20%.
