Now that 2026 is underway, investors should focus on companies that generate solid returns after covering all operating and non-operating expenses. As a result, profitable businesses tend to be more attractive than the money-losing ones. To assess profitability, investors should rely on accounting ratios that focus on the most widely used measure of a company’s bottom-line performance.
With that in mind, two semiconductor stocks emerged as the top profitable picks, backed by robust net income ratios and significant upside potential. Incidentally, they are Micron Technology, Inc. MU and NVIDIA Corporation NVDA, whose shares have soared 239.1% and 38.8%, respectively, last year.
Net Income Ratio Explained
The net income ratio indicates a company's exact profitability level. It reflects the percentage of net income to total sales revenues. Using the net income ratio, one can determine a firm’s effectiveness in meeting operating and non-operating expenses from revenues. A higher net income ratio usually implies a company’s ability to generate sufficient revenues and manage all business functions effectively.
Screening Parameters Using Research Wizard:
The net income ratio is not the only indicator of future winners. So, we have added a few more criteria to arrive at a winning strategy.
Zacks Rank Equal to #1: Whether the market is good or bad, stocks with a Zacks Rank #1 (Strong Buy) have a proven history of outperformance. You can see the complete list of today’s Zacks #1 Rank stocks here.
Trailing 12-Month Sales and Net Income Growth Higher than X Industry: Stocks that have witnessed higher-than-industry sales and net income growth in the past 12 months are positioned to perform well.
Trailing 12-Month Net Income Ratio Higher than X Industry: A high net income ratio indicates a company’s solid profitability.
Percentage Rating Strong Buy greater than 70: This indicates that 70% of the current broker recommendations for the stock are Strong Buy.
These few parameters have narrowed the universe of more than 7,685 stocks to only seven.
Here are two of the seven stocks that qualified for the screening:
Micron Technology
Micron Technology is a provider of memory and storage products globally. The 12-month net profit margin of MU is 28.2% (read more: Micron at 11.7 P/E: One of 2026's Best Buying Opportunities).
NVIDIA
NVIDIA is a global computing infrastructure company offering graphics, compute and networking solutions. The 12-month net profit margin of NVDA is 53% (read more: Micron vs. NVIDIA: One AI Chip Stock is Poised to Win Big in 2026).
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This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
