When the operating income margin continues to expand, it means that the company is becoming more efficient in generating profits from its operating activities.
The operating income margin is a more effective measure than the net income margin when appraising whether the company is capable of generating income, as the metric excludes those items on which the company has no or limited control, but that could weigh on the net income notably in some years.
Thus, investors may want to consider the three stocks listed below, as their operating income margins have expanded in recent years.
Broadcom Inc
The first stock investors may want to consider is Broadcom Inc (AVGO, Financial), a San Jose, California-based manufacturer and distributor of various semiconductors worldwide.
The company saw its trailing 12-month operating income margin (17.63% as of the most recent full fiscal year) grow by 8.6% on average every year over the past five years.
The share price increased by 192.12% over the past five years to trade at $477.65 at close on Wednesday for a market capitalization of $195.96 billion. Currently, Broadcom Inc pays a quarterly cash dividend of $3.60 per common share, leading to a dividend yield of 3.01% as of July 28.
On Wall Street, the stock has a median recommendation rating of overweight with an average target price of $532.07 per share.
Capital World Investors dominates the group of top fund holders with 9.56% of shares outstanding. It is followed by Vanguard Group Inc with 8.94% of shares outstanding and Capital International Investors with 8.14% of shares outstanding.
Moody's Corporation
The second stock investors may want to consider is Moody's Corporation (MCO, Financial), a New York-based credit ratings agency.
The company saw its trailing 12-month operating income margin (45.56% as of the most recent full fiscal year) grow by 1.1% on average every year over the past five years.
The share price of $378.58 at close on Wednesday has risen by 259.63% over the past five years for a market capitalization of $70.87 billion. Currently, Moody's Corporation pays a quarterly cash dividend of 62 cents per common share, leading to a dividend yield of 0.66% as of July 28.
On Wall Street, the stock has a median recommendation rating of overweight with an average target price of $394 per share.
Warren Buffett (Trades, Portfolio) Inc is the leader in the group of top fund holders of the company with 13.18% of shares outstanding, followed by Vanguard Group with 7.19% of shares outstanding and BlackRock Inc. with 5.91% of shares outstanding.
Match Group Inc
The third stock investors may want to consider is Match Group Inc (MTCH, Financial), a Dallas, Texas-based online dating website.
The company saw its trailing 12-month operating income margin (31.18% as of the most recent full fiscal year) grow by 49.9% on average every year over the past five years.
The share price has risen by 800% over the past five years to trade at $163.62 at close on Wednesday for a market capitalization of $45.24 billion. Currently, Match Group Inc doesn’t pay dividends. The company paid its last quarterly cash dividend, 15.8 cents per common share, on Dec. 1, 2015.
On Wall Street, the stock has a median recommendation rating of overweight with an average target price of $172.78 per share.
Price T Rowe Associates Inc /Md/ is the leader in the group of top fund holders with 11.35% of shares outstanding. It is followed by Jennison Associates LLC with 8.48% of shares outstanding and Vanguard Group with 8.45% of shares outstanding.
Disclosure: I have no positions in any securities mentioned in this article.
