If you want to have a higher chance to come across companies in good shape from a financial standpoint, one method is to look for stocks whose Ebitda margins are beating the S&P 500's, which stands at 17.84% as of the writing of this article.
The Ebitda margin (which is the earnings before interest, tax, depreciation and amortization divided by the total revenue) is a reliable ratio of a company's financial health as it has no need to consider specific corporate filing decisions and tax laws when appraising the company's performance.
Below are three companies that have high Ebitda margins and positive ratings from Wall Street sell-side analysts.
Apple Inc
The first company that makes the cut is Apple Inc (AAPL, Financial), a Cupertino, California-based U.S. electronic devices giant.
Apple's Ebitda margin is 30.1%, as its Ebitda for the trailing twelve months ended in December 2020 was $88.384 billion and revenue for the trailing twelve months was $294.135 billion.
The share price has grown 65% over the past year to trade at $121.26 at close on Friday for a market capitalization of $2.04 trillion, a 52-week range of $53.15 to $145.09 and an enterprise value-to-Ebitda ratio of 23.43 versus the industry median of 13.76.
The stock's dividend yield is 0.68%.
On Wall Street, the stock has a median recommendation rating of overweight and an average target price of $151.46 per share.
Vanguard Group Inc leads the group of top fund holders with 7.48% of shares outstanding. It is followed by BlackRock Inc. with 6.30% of shares outstanding and Warren Buffett (Trades, Portfolio) with 5.28% of shares outstanding.
Tencent Holdings Ltd
The second company that makes the cut is Tencent Holdings Ltd (TCEHY, Financial), a Chinese multinational conglomerate that holds several subsidiaries that specialize in a broad range of internet-related services and products as well as artificial intelligence and technology.
Tencent Holdings' Ebitda margin is 30.34%, as its Ebitda for the trailing twelve months ended in June 2020 was $18.314 billion and revenue for the trailing twelve months was $60.364 billion.
The share price has increased by 78.71% over the past year to close at $87.20 on Friday for a market capitalization of $860.33 billion, a 52-week range of $40.80 to $99.40 and an enterprise value-to-Ebitda ratio of 46.48 versus the industry median of 19.05.
The stock's dividend yield is 0.18%.
On Wall Street, the stock has a median recommendation rating of buy and an average target price of $97.69 per share.
Ken Fisher (Trades, Portfolio) dominates the group of top fund holders with 0.36% of shares outstanding. It is followed by DSM Capital Partners LLC with 0.07% of shares outstanding and Catherine Wood (Trades, Portfolio) with 0.07% of shares outstanding.
Taiwan Semiconductor Manufacturing Co Ltd
The third stock to consider is Taiwan Semiconductor Manufacturing Co Ltd (TSM, Financial), a Taiwanese global producer and distributor of integrated circuits.
Taiwan Semiconductor Manufacturing's Ebitda margin is 65.74%, as its Ebitda for the trailing twelve months ended in September 2020 was $28.591 billion and revenue for the trailing twelve months was $43.476 billion.
The share price has climbed by 129.37% over the past year to close at $125.94 on Friday, determining a market capitalization of $661.73 billion, a 52-week range of $42.70 to $142.20 and an enterprise value-to-Ebitda ratio of 19.44 versus the industry median of 19.17.
The stock's forward dividend yield is 1.37%.
On Wall Street, the stock has a median recommendation rating of buy and an average target price of $143.25 per share.
JPMorgan Chase & Co is the leader in the group of top fund holders with 1.22% of shares outstanding. It is followed by Sanders Capital, LLC with 0.85% of shares outstanding and Bank of New York Mellon Corp with 0.79% of shares outstanding.
Disclosure: I have no positions in any securities mentioned in this article.
Read more here:
- A Trio of Stocks With a Record of Operating Income Margin Growth
- 3 Stocks That Could Represent Bargain Opportunities
- 3 Stocks Growing Free Cash Flow Fast
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