Santa Rally on the Horizon: Investors Eye NVIDIA and Royal Caribbean
The S&P 500 appears set to experience a Santa Rally, with expectations to continue its winning momentum into the new year. Factors such as Donald Trump’s election victory and potential interest rate cuts are providing optimism. Thus, savvy investors should focus on profitable companies rather than less profitable ones that could benefit from the overall rise in the index.
Understanding the Net Income Ratio
The net income ratio measures how profitable a company is. It calculates the percentage of net income against total sales revenue.
By analyzing the net income ratio, investors can assess a company’s capacity to cover its operating and non-operating expenses with its revenues. Generally, a high net income ratio suggests strong revenue generation paired with effective business management.
Screening for Winning Stocks: Key Criteria
While the net income ratio is a valuable indicator, additional criteria should also be considered for selecting winning stocks.
Zacks Rank less than or equal to 2: Notably, stocks rated with a Zacks Rank #1 (Strong Buy) or #2 (Buy) tend to outperform the market regardless of its condition. A current list of today’s Zacks #1 Rank stocks is available.
Trailing 12-Month Sales and Net Income Growth Higher than Industry: Stocks showing greater sales and net income growth compared to their industry peers over the past year are likely to succeed.
Trailing 12-Month Net Income Ratio Higher than Industry: A higher ratio indicates better profitability for a company.
Percentage Rating Strong Buy greater than 70: This means that 70% of current broker recommendations classify the stock as a Strong Buy.
Applying these parameters narrowed the field from over 7,685 stocks to just 34.
Here are the top two stocks that emerged from this screening:
NVIDIA Corporation
NVIDIA Corporation, a leader in visual computing technologies, is renowned for creating the graphic processing unit (GPU). Recent strong data center results and a positive outlook make it a strong investment choice. NVIDIA holds a Zacks Rank #2.
With a 12-month net profit margin of 55.7%, the company anticipates an earnings growth rate of 40.8% for the upcoming year.
Image Source: Zacks Investment Research
Royal Caribbean Cruises Ltd.
Royal Caribbean Cruises operates a global cruise business. It benefits from a strong demand for cruising, increased bookings, and a growing loyal customer base, enhancing its attractiveness to investors. The company also has a Zacks Rank #2.
The 12-month net profit margin for Royal Caribbean Cruises is 16.2%, with an expected earnings growth rate of 23.8% for the next year.
Image Source: Zacks Investment Research
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Disclosure: Officers, directors, and/or employees of Zacks Investment Research may hold positions in stocks mentioned within this material.
Performance information for Zacks’ portfolios and strategies can be found at: zacks.com/performance.
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The views expressed in this article are solely those of the author and may not reflect the opinions of Nasdaq, Inc.
