CHICAGO, Sept. 21, 2011 /PRNewswire/ -- Stocks in this
week's article include: Crocs, Inc. (NASDAQ: CROX),
Domino's Pizza, Inc. (NYSE: DPZ), IAC/InterActiveCorp
(NASDAQ: IACI), Lululemon Athletica Inc. (NASDAQ: LULU) and
Select Comfort Corporation (NASDAQ: SCSS). Kevin Matras looks at Sales Growth and
Increasing Profit Margins; a powerful combination for big
returns.
(Logo: http://photos.prnewswire.com/prnh/20101027/ZIRLOGO)
Screen of the Week written by Kevin
Matras of Zacks Investment Research:
This week I want to focus on Sales Growth and Profit Margins.
While everybody understands sales, margins might bring up a few
question marks. And with earnings season only about three weeks
away (it officially kicks off on Oct.
11th with Alcoa), now is the perfect time to look at
this.
So let's start at the beginning: first and foremost, sales are
THE most important thing to a company. Everything else stems from
that. Without sales, there really wouldn't be anything else to
analyze. And Sales Growth numbers show you how that company is
growing.
However, just because sales are increasing, 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 dollar 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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