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 15.72% 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 does not 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 have high Ebitda margins. Wall Street sell-side analysts have also issued positive recommendation ratings for them.
Apple Inc.
The first company that makes the cut is Apple Inc. (AAPL, Financial), a Cupertino, California-based manufacturer of smartphones, personal computers, tablets, wearables and accessories worldwide.
Apple Inc.’s trailing 12-month Ebitda margin is 34%, resulting from Ebitda of $131.69 billion and revenue of $387.54 billion for the 12 months ended June 2022.
The closing share price of $152.37 on Thursday was up 4.32% compared to year-ago levels. The company has a market capitalization of $2.45 trillion and a 52-week range of $129.04 to $182.94.
The stock grants a trailing 12-month dividend yield of 0.59% and a forward dividend yield of 0.60%. The company last paid a quarterly dividend of 23 cents per common share on Aug. 11.
On Wall Street, the stock has a median recommendation rating of overweight and an average target price of $142.89 per share.
Advanced Micro Devices Inc.
The second company that qualifies is Advanced Micro Devices Inc. (AMD, Financial), a Santa Clara, California-based global semiconductors designer.
Advanced Micro Devices Inc.’s trailing 12-month Ebitda margin is 26.54%, resulting from Ebitda of $5.72 billion and revenue of $21.57 billion for the 12 months ended in June.
Thursday's closing share price of $76.66 was down 26.20% compared to year-ago levels for a market capitalization of $123.75 billion and a 52-week range of $71.60 to $164.46.
Advanced Micro Devices Inc. does not pay dividends.
On Wall Street, the stock has a median recommendation rating of overweight and an average target price of $120.33 per share.
Tesla Inc.
The third stock that meets the criteria is Tesla Inc. (TSLA, Financial), an Austin, Texas-based manufacturer of electric vehicles as well as energy generation and storage systems that are sold in the United States, China and internationally.
Tesla Inc.’s trailing 12-month Ebitda margin is 16.46%, resulting from Ebitda of $14.33 billion and revenue of $67.16 billion for the 12 months ended in June.
The closing share price of $303.75 on Thursday was up 19.98% compared to year-ago levels for a market capitalization of $951.79 billion and a 52-week range of $206.86 to $414.50.
Tesla Inc. does not pay dividends.
On Wall Street, the stock has a median recommendation rating of overweight and an average target price of $312.93 per share.
Alphabet Inc.
The fourth stock that meets the criteria is Alphabet Inc. (GOOG, Financial)(GOOGL, Financial), a Mountain View, California-based tech conglomerate.
Alphabet Inc.’s Ebitda margin is 36.02%, resulting from Ebitda of $100.19 billion and revenue of $278.13 billion for the 12 months ended in June.
Alphabet Inc.'s stock closed Thursday at $103.90 per non-voting share, down 26.55% year-over-year, for a market cap of $1.35 trillion and a 52-week range of $102.20 to $152.10.
Alphabet Inc.'s voting shares closed Thursday at $102.91, down 26.91% year-over-year, with a market cap of $1.35 trillion and a 52-week range of $101.88 to $151.54.
Alphabet Inc. does not pay dividends.
On Wall Street, the company's non-voting shares have a medium buy rating and an average price target of $141.76 per share, while the voting shares have a medium buy rating and an average price target of $141.72 per share.
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