NVIDIA & 2 Other Profitable Stocks to Retain in August

Investors should look for companies that generate strong returns after accounting for all operating and non-operating expenses. Therefore, it’s wise to invest in a profitable company rather than one that is losing money.

Here, we use accounting ratios to evaluate a company’s profitability. Among various profitability ratios, we select the most effective and commonly used metric to assess a firm’s bottom-line performance.

To that end, NVIDIA Corporation NVDA, Broadcom Inc. AVGO and ServiceNow, Inc. NOW have been selected as top picks for the second half of the year due to their high net income ratios.

Net Income Ratio

The net income ratio gives us the exact profitability level of a company. 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 ample revenues and successfully manage all business functions.

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 less than or equal to 3 (Only Zacks’ ‘Strong Buys’, ‘Buys’, and ‘Holds’ are allowed. With the Zacks Rank proving itself to be one of the best rating systems out there, this is a great way to start things off.)

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 11.

Here are three of the 11 stocks that qualified for the screening:

NVIDIA

NVIDIA offers solutions for graphics, computing, and networking in the United States, Singapore, Taiwan, China, Hong Kong and around the world. The 12-month net profit margin of NVDA is 51.7%. NVIDIA has a Zacks Rank #3 (Hold) (read more: IonQ or NVIDIA: Which Stock Has More Upside in Quantum?).

Broadcom

Broadcom creates, builds and provides a range of semiconductor devices and infrastructure software solutions around the globe. The 12-month net profit margin of AVGO is 22.6%. Broadcom has a Zacks Rank #3. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

ServiceNow

ServiceNow offers a cloud-based solution designed for digital workflows across North America, Europe, the Middle East and Africa, Asia Pacific, and on an international scale. The 12-month net profit margin of NOW is 13.8%. ServiceNow has a Zacks Rank #3.

You can get the rest of the stocks on this list by signing up now for your 2-week free trial to the Research Wizard and start using this screen in your own trading. Further, you can also create your own strategies and test them first before taking the investment plunge.

The Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.

Click here to sign up for a free trial to the Research Wizard today.

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.

Disclosure: Performance information for Zacks’ portfolios and strategies are available at: https://www.zacks.com/performance.

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This article originally published on Zacks Investment Research (zacks.com).

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