If you want to enhance your likelihood to unearth companies that are in good shape from a financial standpoint, you may want to consider the following three stocks, as their trailing 12-month (TTM) Ebitda margins are outperforming the S&P 500's 10.7% as of the writing of this article.
The Ebitda margin, which is calculated as earnings before interest, tax, depreciation and amortization divided by total revenue, is a good indicator of a company's financial health as it doesn't consider the effect of unique decisions and tax laws when evaluating a company's performance. These decisions refer to the recognition of amortization and depreciation, which may differ significantly, even among companies that operate in the same industry.
Wall Street sell-side analysts have also issued positive recommendation ratings for these stocks.
SAP SE
The first company that makes the cut is SAP SE (SAP, Financial), a Walldorf, Germany-based enterprise application software company serving various businesses worldwide.
SAP SE's Ebitda margin is 36.83% as a result of Ebitda of $11.793 billion and revenue of $32.019 billion for the trailing 12 months ended in March 2021.
The share price, $140.78 at close on Monday, is flat compared to year-ago levels with a market capitalization of $166.16 billion and a 52-week range of $104.64 to $169.30.
The stock's trailing dividend yield of 1.61% is calculated from an annual dividend of $2.26 per common share paid on May 25.
On Wall Street, the stock has a median recommendation rating of overweight and an average target price of $153.50 per share.
Ken Fisher (Trades, Portfolio) leads the group of top fund holders with 0.73% of shares outstanding. The investor is followed by Harding Loevner LP with 0.47% of shares outstanding and Vulcan Value Partners (Trades, Portfolio), LLC with 0.38% of shares outstanding.
Texas Instruments Inc
The second company that qualifies is Texas Instruments Inc (TXN, Financial), a Dallas, Texas-based global semiconductors manufacturer.
Texas Instruments Inc's Ebitda margin is 51.3% as a result of Ebitda of $7.906 billion and revenue of $15.421 billion for the trailing 12 months ended in March 2021.
The share price, $186.11 at close on Monday, represents a nearly 47% increase compared to year-ago levels, for a market capitalization of $171.57 billion and a 52-week range of $122.35 to $197.58.
The stock's trailing dividend yield of 2.13% is calculated from a quarterly dividend of $1.02 per common share paid on May 17.
On Wall Street, the stock has a median recommendation rating of overweight and an average target price of $201.15 per share.
Vanguard Group Inc leads the group of top fund holders with 9.03% of shares outstanding. The asset management firm is followed by BlackRock Inc. with 7.68% of shares outstanding and State Street Corp with 4.16% of shares outstanding.
Medtronic PLC
The third stock that makes the cut is Medtronic PLC (MDT, Financial), a Dublin, Ireland, manufacturer and seller of medical devices and therapies with operating activities worldwide.
Medtronic PLC's Ebitda margin is 24.98% as a result of an Ebitda of $7.524 billion and a revenue of $30.117 for the trailing twelve months ended in April 2021.
The share price has increased by 34.43% over the past year to close at $125.54 on Monday, determining a market capitalization of $168.74 billion and a 52-week range of $87.68 to $132.30.
The stock's forward dividend yield of 2.01% is calculated from a quarterly dividend of 63 cents per common share to be paid on July 16.
On Wall Street, the stock has a median recommendation rating of buy and an average target price of $142.17 per share.
Vanguard Group dominates the group of top fund holders of the company with 8.24% of shares outstanding. The investment firm is followed by BlackRock with 7.92% of shares outstanding and State Street Corp with 4.06% of shares outstanding.
Disclosure: I have no positions in any securities mentioned in this article.
