When the operating income margin continues to grow, it means a 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 evaluating whether a company can generate income, as the metric excludes those items on which it has no or limited control, but that could weigh on the net income notably in some years.
The stocks listed below meet the above criteria, as their operating income margins have grown in recent years.
Applied Materials Inc
The first stock that investors may want to consider is Applied Materials Inc (AMAT, Financial), a Santa Clara, California-based supplier of manufacturing equipment, services and software to semiconductor producers.
The company saw its trailing 12-month operating income margin (29.91% as of the July 2021 quarter) grow by 7.6% on average every year over the past five years.
The share price increased by almost 420% over the past five years to close at $150.40 on Wednesday for a market capitalization of $135.80 billion.
Applied Materials will pay a quarterly dividend of 24 cents per common share on Dec. 16 for a forward dividend yield of 0.64% as of Nov. 10.
On Wall Street, the stock has a median recommendation rating of overweight with an average target price of $162.52 per share.
BlackRock Inc. dominates the group of top fund holders with 8.29% of shares outstanding. It is followed by Vanguard Group Inc. with 8.04% of shares outstanding and State Street Corp. with 4.40% of shares outstanding.
Moody's Corporation
The second stock that investors may want to consider is Moody's Corporation (MCO, Financial), a New York-based popular credit ratings agency.
The company saw its trailing 12-month operating income margin (47% as of the September 2021 quarter) grow by 1.10% on average every year over the past five years.
The share price of $387.69 at close on Wednesday has risen by 287.5% over the past five years for a market capitalization of $72.07 billion.
Moody's Corporation will pay a quarterly dividend of 62 cents per common share on Dec. 14 for a forward dividend yield of 0.64% as of Nov. 10.
On Wall Street, the stock has a median recommendation rating of overweight with an average target price of $431.19 per share.
Warren Buffett (Trades, Portfolio) is the leader in the group of top fund holders of the company with 13.25% of shares outstanding, followed by Vanguard Group Inc. with 7.26% of shares outstanding and BlackRock Inc. with 6.01% of shares outstanding.
Canadian Pacific Railway Ltd
The third stock that investors may want to consider is Canadian Pacific Railway Ltd. (CP, Financial), a Canadian railroad company.
The company saw its trailing 12-month operating income margin (42% as of the September 2021 quarter) grow by 2.60% on average every year over the past five years.
The share price has risen by 170% over the past five years for a market capitalization of $51.1 billion.
Canadian Pacific Railway Ltd will pay a quarterly dividend of 0.19 Canadian dollars ($0.15) per common share on Jan. 31 for a forward dividend yield of 0.79% as of Nov. 10.
On Wall Street, the stock has a median recommendation rating of overweight with an average target price of approximately $81 per share.
TCI Fund Management Ltd is the leader in the group of top fund holders with 8.38% of shares outstanding. It is followed by FMR LLC with 5.19% of shares outstanding and WCM INVESTMENT MANAGEMENT, LLC with 4.80% of shares outstanding.
