Screen of the Week: Sales & Margins - Screen of the Week

By
A A A

This week I want to focus on Sales Growth and Profit Margins.

While everybody understands sales, margins might bring up a few question marks.

And with this earnings season essentially over, now is the perfect time to look at this.

So let's start at the beginning: first and foremost, sales are THE most important thing to a company. Everything else stems from that. Without sales, there really wouldn't be anything else to analyze. And Sales Growth numbers show you how that company is growing.

However, just because sales are increasing, doesn't always mean that profits are increasing too. Sales at the expense of profits does not work. So paying attention to Profit Margins is the next thing we're going to want to look at.

Margin is simply a ratio and the calculation is:

Net Income divided by Sales

So if a Company's margin is 15% for instance, that means the Company's net income is 15 cents for every $1 dollar of sales it makes.

But if a Company's expenses are growing faster than their sales, this'll reduce their margins.

In general, a company with increasing margins is becoming more profitable and is better managed, i.e., their costs are under control.

So continue to look at their sales numbers. And of course, look at their earnings too. But take a look at their profit margins as well. Are they going up or down? In other words, are they making more money on each dollar of sales they make, or less? This is important stuff to know, and can make a huge difference in your portfolio's bottom line.

Parameters for this week's screen:

  • 12 Month Trailing Sales Growth (Current / 1 Quarter Ago) greater than their relevant Industry median (Looking for the top companies in their industries.)
  • Current Net Margin greater than or equal to 5 Yr. Avg. Net Margin (Steady to increasing Net Profits is what we're after.)
  • Current Net Margin greater than or equal to Net Margin from 1 Quarter Ago (If a company's profit margin fell last quarter, there's a chance it might fall yet again. So we're excluding those companies whose margins fell in the previous quarter.)
  • Zacks Rank equal to 1 (Strong Buy) (Only the top Zacks Ranked stocks can get thru.)

Here are 5 stocks that passed this screen this week for 12/26/12:

AWR American States Water
FAF First American Financial
MDC M.D.C. Holdings
SMP Standard Motor Products
TYL Tyler Technologies

Sign up now for your 2 week free trial to the Research Wizard and start adding these values to your own screening strategies. Or start following this screen's winning picks in your own portfolio. Don't wait. Learn how today.

Sign up for your 2 week FREE trial to the Research Wizard

Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.



AMER STATES WTR (AWR): Free Stock Analysis Report

FIRST AMER FINL (FAF): Free Stock Analysis Report

MDC HLDGS (MDC): Free Stock Analysis Report

STANDARD MOTOR (SMP): Free Stock Analysis Report

TYLER TECH INC (TYL): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Investing Ideas , Stocks

Referenced Stocks: AWR , FAF , MDC , SMP , TYL

Zacks.com

Zacks.com

More from Zacks.com:

Related Videos

Stocks

Referenced

Most Active by Volume

55,414,702
  • $15.38 ▼ 0.39%
38,503,210
  • $66.34 ▲ 2.26%
36,466,704
  • $8.36 ▼ 9.52%
35,253,294
  • $26.55 ▲ 1.34%
32,752,347
  • $6.55 ▲ 1.87%
31,778,001
  • $95.22 ▲ 0.19%
28,396,556
  • $51.49 ▼ 0.62%
23,800,987
  • $42.09 ▲ 0.97%
As of 7/11/2014, 04:03 PM