For this article we found stocks reaching a new 52-week high that had better profitability metrics than their industry rivals. In other words, these companies have been maximizing revenues and minimising costs better than their competitors.
The metrics we use are Trailing Twelve Month (TTM) gross margin,operating margin, and pretax margin. To narrow the field, we chose the stocks with market caps over $300M. Our top 4 names are listed in detail below.
If you’re new to the investing game, have no fear; we know there’s a lot to take in. If you need help with any terms used above, here are some quick and easy definitions:
52-Week High – Momentum: The 52-Week High is the highest price paid for a share of the company in the last 52 weeks (one year). The 52-Week Low is the lowest price paid for a share of a given stock in the last 52 weeks (one year). Momentum investing aims to capitalise on the continuance of existing trends and the strength behind it.
Trailing twelve months (TTM): An indication that the calculated data has come from the last twelve months. For example, if data released in July 2045 is “”TTM”” (ie, P/E TTM or “”Trailing P/E””), this means the price and the earning-per-share data comes from the twelve-month period of August 2044 to July 2045.
TTM Gross margin: This metric that tells us the percentage of a company’s revenue is left after paying all production expenses. Costs include overhead, payroll and taxation. ((revenues – cost of goods sold) / Revenue ) *100 = Gross margin %
TTM Operating margin: This tells us the percentage remaining after all operating expenses are paid. Operating expenses include: supplies, repairs, research and development, and depreciation. (Operating Income / Net Operating Revenue) *100 = Operating Margin %
TTM Pretax margin: A company’s earnings before taxes. This incorporates all of the expenses associated with business excluding taxes. It can help to determine the overall operating efficiency of the firm. The higher the pretax margin, the more profitable the company. (Net profit before taxes / net sales) *100 = Pretax Margin
Market capitalisation (Market Cap): Market capitalisation, commonly referred to as market cap, is the total market value of a company’s outstanding shares. It can be thought of as a measure of company’s size. It can be calculated by multiplying the number of shares by the current price of the shares.
Example, If company X has 15 million outstanding shares valued at $25 a share, the market cap would be $15M x $25 = $375M. If Company’s X’s stock price rises to $30 then the new market value will be $450 Million ($15M x $30 = $450M).
Now that you’re armed with information, take a look at our profitable stocks below. Do you think their momentum will continue to benefit their market values? Use the list as a starting-off point for your own analysis.
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1. AmTrust Financial Services, Inc. (AFSI): Property & Casualty Insurance Industry. Market cap of $1.38B. Current price at $23.67. Currently operating 0.17% above its 52-week high. Gross margin (TTM) at 17.89% vs. industry average 16.98%. Operating margin (TTM) at 15.93% vs. industry average 13.65%. Pretax margin at 19.1% vs. industry average of 11.97%. The stock has had a good month, gaining 10.01%.
2. DPL Inc. (DPL): Diversified Utilities Industry. Market cap of $3.55B. Current price at $30.38. Currently operating 0.09% below its 52-week high. Gross margin (TTM) at 32.03% vs. industry average 27.35%. Operating margin (TTM) at 24.91% vs. industry average 18.97%. Pretax margin at 20.46% vs. industry average of 14.26%. The stock has gained 10.63% over the last quarter.
3. Esterline Technologies Corp. (ESL): Aerospace/defence Products & Services Industry. Market cap of $2.50B. Current price at $81.57. Currently operating 0.63% below its 52-week high. Gross margin (TTM) at 38.2% vs. industry average 25.81%. Operating margin (TTM) at 14.4% vs. industry average 11.69%. Pretax margin at 12.12% vs. industry average of 6.85%. The stock has had a couple of great days, gaining 5.06% over the last week.
4. Federal Realty Investment Trust (FRT): REIT Industry. Market cap of $5.49B. Current price at $89.07. Currently operating 0.51% below its 52-week high. Gross margin (TTM) at 42.09% vs. industry average 38.63%. Operating margin (TTM) at 42.09% vs. industry average 37.68%. Pretax margin at 23.68% vs. industry average of 16.71%. The stock has gained 10.16% over the last quarter.
(List compiled by Becca Lipman)