As 2026 has begun, investors should look for companies that deliver strong returns after covering all operating and non-operating expenses. Therefore, investing in profitable businesses is generally preferred over money-losing ones. To evaluate profitability, we use accounting ratios, with a focus on the most widely used metric to assess a company’s bottom-line performance.
To that end, Micron Technology, Inc. MU, Credo Technology Group Holding Ltd CRDO and Innovative Aerosystems, Inc. ISSC have been selected as the top profitable picks due to their high net income ratios and strong upside potential. Incidentally, shares of Micron, Credo Technology, and Innovative Aerosystems have soared 239.1%, 114% and 121.8%, respectively, over the past year.
Net Income Ratio Explained
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 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 six.
Here are three of the six stocks that qualified for the screening:
Micron Technology
Micron Technology designs, manufactures and sells memory and storage products worldwide. The 12-month net profit margin of MU is 28.2% (read more: Micron vs. NVIDIA: One AI Chip Stock is Poised to Win Big in 2026).
Credo Technology
Credo Technology provides high-speed Ethernet and PCIe connectivity solutions globally. The 12-month net profit margin of CRDO is 26.6%.
Innovative Aerosystems
Innovative Aerosystems designs, manufactures and supplies advanced avionics solutions. The 12-month net profit margin of ISSC is 18.5%.
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Micron Technology, Inc. (MU): Free Stock Analysis Report Innovative Solutions and Support, Inc. (ISSC): Free Stock Analysis Report Credo Technology Group Holding Ltd. (CRDO): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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