CHICAGO, July 10, 2013 /PRNewswire/ -- Stocks in this week's article include: On Assignment Inc. (NYSE: ASGN – Free Report), Conns Inc. (NASDAQ: CONN – Free Report), Flowers Foods, Inc. (NYSE: FLO – Free Report), Multimedia Games Inc. (NASDAQ: MGAM – Free Report) and Visteon Corp. (NYSE: VC – Free Report). This week, Kevin Matras looks at the powerful combination of Sales Growth and Increasing Profit Margins.
Screen of the Week written by Kevin Matras of Zacks Investment Research:
With earnings season underway, I wanted to talk this week about Sales Growth and Profit Margins. While everybody understands sales, margins might bring up a few question marks.
So let's start at the beginning: first and foremost, sales are THE most important thing to a company. Everything else stems from that. And Sales Growth numbers show you how that company is growing.
However, increasing sales doesn't always mean that profits are increasing too. Sales at the expense of profits does not work. So paying attention to Profit Margins is the next thing we're going to want to look at.
Margin is simply a ratio and the calculation is: Net Income divided by Sales.
So if a company's margin is 15% for instance, that means its net income is 15 cents for every $1 of sales it makes. But if a company's expenses are growing faster than sales, this will reduce its margins. In general, a company with increasing margins is becoming more profitable and is better managed, i.e., its costs are under control.
So this earnings season, dig deeper into the numbers. Yes, look at their sales. And of course, look at their earnings. But take a look at their profit margins as well. Are they going up or down? In other words, are they making more on each dollar of sales they make, or less? This is important stuff to know, and could make the difference between investors buying a company's earnings announcement, or selling it.
Parameters for this week's screen are...
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