If you want to have a higher likelihood to find 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 topping the S&P 500's 10.74% 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 the performance of a company. 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.
Amgen Inc
The first company that makes the cut is Amgen Inc. (AMGN, Financial), a Thousand Oaks, California-based drug major.
Amgen Inc's Ebitda margin is 43.8%, resulting from Ebitda of $11.154 billion and revenue of $25.484 billion for the trailing 12 months ended in June 2021.
The share price, $209.12 at close on Thursday, is an 11.7% decline compared to year-ago levels. The company has a market capitalization of $118.75 billion and a 52-week range of $208.53 to $276.69.
The stock grants a trailing dividend yield of 3.29%. The company last paid a quarterly dividend of $1.76 per common share on Sept. 8.
On Wall Street, the stock has a median recommendation rating of hold and an average target price of $246.10 per share.
Equinix Inc
The second company that makes the cut is Equinix Inc (EQIX, Financial). Based in Redwood City, California, the company is a global provider of internet connection and data centers services.
Equinix Inc's Ebitda margin is 37%, resulting from Ebitda of $2.345 billion and revenue of $6.338 billion for the trailing 12 months ended in June 2021.
The share price, $766.49 at close on Thursday, represents a 7.6% decline compared to year-ago levels for a market capitalization of $68.79 billion and a 52-week range of $586.73 to $885.26.
The stock grants a trailing dividend yield of 1.49%. The company last paid a quarterly dividend of $2.87 per common share on Sept. 22.
On Wall Street, the stock has a median recommendation rating of buy and an average target price of $894.65 per share.
Endava PLC
The third stock that qualifies is Endava PLC (DAVA, Financial), a London, United Kingdom-based provider of technology services for global clients in several markets such as consumer products, healthcare, mobility and retail vertical markets.
Endava PLC's Ebitda margin is 12.52%, resulting from Ebitda of $76.1 million and revenue of $607.8 million for the trailing 12 months ended in June 2021.
The share price, $151.31 at close on Thursday, represents a 132% increase compared to year-ago levels for a market capitalization of $8.43 billion and a 52-week range of $60.01 to $153.75.
Currently, Endava PLC does not pay dividends.
On Wall Street, the stock has a median recommendation rating of overweight and an average target price of $107.79 per share.
Disclosure: I have no positions in any securities mentioned in this article.
