CHICAGO, May 11, 2011 /PRNewswire/ -- Stocks in this week's article include: Cost Plus, Inc. (NASDAQ: CPWM), Global Geophysical Services, Inc. (NYSE: GGS), Ligand Pharmaceuticals Inc. (NASDAQ: LGND), Rex Energy Corp. (NASDAQ: REXX) and Western Alliance Bancorp. (NYSE: WAL). Kevin Matras screens for companies showing their 'first' profit and explains why these are ones to watch.
Screen of the Week written by Kevin Matras of Zacks Investment Research:
With earnings season winding down, I've been running screens with the concept of finding companies that have just recently shown their first quarterly profit within the last year.
The idea is to find companies that have not shown a profit for at least the previous 4 quarters, but have just recently produced their first profit this last quarter.
Some of these companies will be relatively new, so this recent profit may be the only profit in the company's history so far. Others may have a long history of profitability, but haven't seen a profit in a while for whatever reason -- but have finally returned to profitability.
I like this concept because if the trend has been one of improvement, there's a good chance that trend will continue. This is true whether you've been profitable or are just getting profitable.
But some (like myself for example) dislike buying companies that cannot show a profit. And there are many others who won't even consider a stock unless it's making money.
Losing less than the previous quarter is indeed an improvement. And in that respect, by definition, it is growth, i.e., they're growing less unprofitable. And it's even better if the losses are less and less in each sequential quarter.
But there's something entirely different about growth AND being profitable. And those are the stocks that will likely see the best new demand from new investors. People who are now, all of a sudden, willing to take notice of and pay attention to the stock.
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