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For Immediate Release

Chicago, IL – July 23, 2024 – Stocks in this week’s article are Virco Manufacturing Corp. VIRC, HNI Corp. HNI, Great Lakes Dredge & Dock Corp. GLDD and Teekay Tankers Ltd. TNK.

4 Solid Net Profit Margin Stocks to Strengthen Your Portfolio

The primary purpose of a business is to generate profits that can be reinvested in expansion or utilized for rewarding shareholders. Net profit margin is an effective tool to measure the profits reaped by a business.

A higher net margin underlines a company's efficiency in translating sales into actual profits. Moreover, this metric gives insight into how well a company is run and the headwinds weighing on it. Virco Manufacturing Corp., HNI Corp., Great Lakes Dredge & Dock Corp. and Teekay Tankers Ltd. boast solid net profit margins.

Net Profit Margin = Net profit/Sales * 100.

In simple terms, net profit is the amount a company retains after deducting all costs, interest, depreciation, taxes and other expenses. In fact, net profit margin can turn out to be a potent point of reference to gauge the strength of a company's operations and its cost-control measures.

Also, higher net profit is essential for rewarding stakeholders. Further, strength in the metric not only attracts investors but also draws well-skilled employees who eventually enhance the value of a business.

Moreover, a higher net profit margin compared with its peers provides a company with a competitive edge.

Pros and Cons

Net profit margin helps investors gain clarity on a company's business model in terms of pricing policy, cost structure and manufacturing efficiency. Hence, a strong net profit margin is preferred by all classes of investors.

However, net profit margin, as an investment criterion, has its share of pitfalls. The metric varies widely from industry to industry. While net income is a key metric for investment measurement in traditional industries, it is not that important for technology companies.

In addition, the difference in accounting treatment of various items — especially non-cash expenses like depreciation and stock-based compensation — makes comparison a daunting task.

Furthermore, for companies preferring to grow with debt instead of equity funding, higher interest expenses usually weigh on net profit. In such cases, the measure is rendered ineffective while analyzing a company's performance.

Here, we have picked four stocks — Virco Manufacturing, HNI, Great Lakes Dredge & Dock and Teekay Tankers — from the 20 stocks that qualified the screening.

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