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 stocks with trailing 12-month (TTM) Ebitda margins that are topping the S&P 500's 17.93% 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 appraising 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.
The four companies listed below meet the above criteria. Wall Street sell-side analysts have also issued positive recommendation ratings for them.
Diageo PLC
The first company that makes the cut is Diageo PLC (DEO, Financial), an English global producer and seller of alcoholic beverages.
Diageo’s Ebitda margin is 36.51%, resulting from Ebitda of $6.520 billion and revenue of $17.858 billion for the trailing 12 months ended in June 2021.
The share price, $210.40 at close on Thursday, is up 31.64% compared to year-ago levels. The company has a market capitalization of $122.51 billion and a 52-week range of $153.67 to $213.12.
The stock grants a forward dividend yield of 1.89%. The company last paid a semi-annual dividend of $2.426 per share on Oct. 13.
On Wall Street, the stock has a median recommendation rating of overweight and an average target price of $228.62 per share.
Air Products and Chemicals Inc.
The second company that makes the cut is Air Products and Chemicals Inc. (APD, Financial), an Allentown, Pennsylvania-based global distributor of atmospheric and specialty gases and related services.
Air Products and Chemicals Inc.'s Ebitda margin is 38.47%, resulting from Ebitda of $3.971 billion and revenue of $10.323 billion for the trailing 12 months ended in September 2021.
The share price, $303.15 at close on Thursday, is up 12.47% compared to year-ago levels for a market capitalization of $67.14 billion and a 52-week range of $245.75 to $316.39.
The stock grants a forward dividend yield of 1.97%. The company will pay a quarterly dividend of $1.50 per common share on Feb. 14, 2022.
On Wall Street, the stock has a median recommendation rating of overweight and an average target price of $327.53 per share.
EOG Resources Inc.
The third stock that qualifies is EOG Resources Inc. (EOG, Financial), a Houston, Texas-based oil and gas explorer and producer.
EOG Resources Inc.'s Ebitda margin is 45.98%, resulting from Ebitda of $7.667 billion and revenue of $16.645 billion for the trailing 12 months ended in September 2021.
The share price, $86.19 at close on Thursday, is up 66.5% compared to year-ago levels for a market capitalization of $50.43 billion and a 52-week range of $48.20 to $98.20.
The stock grants a forward dividend yield of 3.48%. The company pays quarterly dividends and will issue $0.75 per common share on Jan. 28, 2022.
On Wall Street, the stock has a median recommendation rating of overweight and an average target price of $112.86 per share.
AMETEK
The third stock that qualifies is AMETEK Inc. (AME, Financial), a Berwyn, Pennsylvania-based manufacturer of electronic instruments and electromechanical devices that it then sells worldwide.
AMETEK’s Ebitda margin is 28.98%, resulting from Ebitda of $1.519 billion and revenue of $5.242 billion for the trailing 12 months ended in September 2021.
The share price, $143.85 at close on Thursday, is up 21.80% compared to year-ago levels for a market capitalization of $33.28 billion and a 52-week range of $106.96 to $145.06.
The stock grants a forward dividend yield of 0.56%. The company will pay a quarterly dividend of $0.20 per common share on Dec. 24.
On Wall Street, the stock has a median recommendation rating of overweight and an average target price of $162.96 per share.
