4 Stocks With a History of Operating Income Margin Growth

Over time, these companies have achieved greater efficiency in generating profits from operations

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Apr 08, 2022
Summary
  • Danaher, Netflix, PayPal and Rio Tinto have continued expanding their operating income margins over the past several years.
  • The operating income margin is a more effective measure than the net income margin when evaluating a company's ability to generate income.
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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.

Danaher

The first stock investors may want to consider is Danaher Corp. (

DHR, Financial), a Washington-based manufacturer and marketer of solutions for diagnostics and research.

The stock saw its trailing 12-month operating income margin (25.35% for the most recent fiscal quarter ended Dec. 31) grow by 7.90% on average every year over the past five years.

The share price has risen 250.40% over the past five years to $301.67 in early trading on Friday, giving it a market cap of $215.93 billion.

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The company will pay a quarterly dividend of 25 cents per common share on April 29 for a 12-month dividend yield of 0.29% and a forward dividend yield of 0.33% as of early trading on Friday.

On Wall Street, the stock has a median recommendation rating of overweight with an average target price of $343.11 per share.

Parnassus Core Equity Fund, Vanguard Group Inc. and BlackRock Inc. are among the largest fund holders of the company with 61.11%, 6.99% and 6.18% of shares outstanding.

Netflix

The second stock investors may want to consider is Netflix Inc. (

NFLX, Financial), a Los Gatos, California-based provider of streaming entertainment services.

The company saw its trailing 12-month operating income margin (28.86% as of the December 2021 quarter) grow by 36.80% on average every year over the past five years.

The share price of $356.57 (as of early trading on Friday) has risen by 148.20% over the past five years for a market capitalization of $158.30 billion.

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The company does not pay dividends.

On Wall Street, the stock has a median recommendation rating of overweight with an average target price of $508.75 per share.

Vanguard Group, BlackRock and Capital Research Global Investors are among the largest institutional shareholders of the company with 7.56%, 6.58% and 5.85% of shares outstanding.

PayPal

The third stock that investors may want to consider is PayPal Holdings Inc. (

PYPL, Financial), a San Jose, California-based provider of an online payment system to consumers and merchants worldwide.

The company saw its trailing 12-month operating income margin (17.04% for the most recent quarter) grow by 1.40% on average every year over the past five years.

The share price ($112.30 as of early trading on Friday) has risen 160.86% over the past five years for a market capitalization of $130.87 billion.

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The company does not pay dividends.

On Wall Street, the stock has a median recommendation rating of overweight with an average target price of approximately $174.70 per share.

Vanguard, BlackRock and State Street Corp. are among the largest shareholders of the company with 8.05%, 6.51% and 3.98% of shares outstanding.

Rio Tinto

The fourth stock that investors may want to consider is Rio Tinto PLC (

RIO, Financial), a London-based metals and mining company.

The company saw its trailing 12-month operating income margin (46.95% as of December) grow by 16.60% on average every year over the past five years.

Over the past five years, the price of $80.75 per share (as of early trading on Friday) has risen more than 97%. The stock has a market capitalization of $128.98 billion.

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The company will pay a semiannual dividend of $4.17 per common share on April 21 for a 12-month and forward dividend yield of 9.79% as of early trading on Friday.

On Wall Street, the stock has a median recommendation rating of overweight with an average target price of approximately $85.41 per share.

Ken Fisher (Trades, Portfolio), State Farm Mutual Automobile Insurance Co. and the Washington Mutual Investor Fund are among the largest institutional shareholders of the company with 0.84%, 0.68% and 0.61% of shares outstanding.

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I/we have no positions in any stocks mentioned, and have no plans to buy any new positions in the stocks mentioned within the next 72 hours. Click for the complete disclosure
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