If you want to have a higher chance of finding companies that are in good shape from a financial standpoint, you may want to consider stocks with trailing 12-month Ebitda margins that are topping the S&P 500's 21.75% as of the time of writing.
The Ebitda margin, which is calculated as earnings before interest, taxes, 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 three companies listed below meet these criteria. Wall Street sell-side analysts have also issued positive recommendation ratings for them.
Marathon Oil Corp
The first company that makes the cut is Marathon Oil Corp. (MRO, Financial), a Houston, Texas-based oil and gas exploration and production company.
Marathon Oil Corp.’s Ebitda margin is 62.13%, resulting from Ebitda of $3.843 billion and revenue of $6.185 billion for the trailing 12 months ended in March 2022.
The closing share price of $31.43 on Tuesday was up 126.28% compared to year-ago levels. The company has a market capitalization of $22.24 billion and a 52-week range of $10.41 to $33.24.
The stock grants a forward dividend yield of 1.02%. The company will pay a quarterly dividend of 8 cents per common share on June 10.
On Wall Street, the stock has a median recommendation rating of overweight and an average target price of $34.07 per share.
Gold Fields Ltd
The second company that qualifies is Gold Fields Ltd (GFI, Financial), a South African gold mining company.
Gold Fields Ltd.’s Ebitda margin is 49.32%, resulting from Ebitda of $2.07 billion and revenue of $4.195 billion for the trailing 12 months ended in December 2021.
Tuesday's closing share price of $9.34 was down 22.23% compared to year-ago levels for a market capitalization of $8.80 billion and a 52-week range of $7.75 to $17.20.
The stock grants a forward dividend yield of 3.42%. The company last paid a semi-annual dividend of 17.2 cents per share on March 24.
On Wall Street, the stock has a median recommendation rating of hold and an average target price of $13.05 per share.
The Coca-Cola Company
The third stock that meets the criteria is The Coca-Cola Company (KO, Financial), an Atlanta, Georgia-based global nonalcoholic beverages company.
The Coca-Cola Company’s Ebitda margin is 39.54%, resulting from Ebitda of $15.867 billion and revenue of $40.126 billion for the trailing 12 months ended in March 2022.
The closing share price of $63.38 on Tuesday was up 14.20% compared to year-ago levels for a market capitalization of $274.75 billion and a 52-week range of $52.28 to $67.20.
The stock grants a forward dividend yield of 2.78%. The company will pay a quarterly dividend of 44 cents per common share on July 1.
On Wall Street, the stock has a median recommendation rating of overweight and an average target price of $70.43 per share.
