Are You a Momentum Investor? This 1 Stock Could Be the Perfect Pick

For Immediate Release

Chicago, IL – November 13, 2024 – Stocks in this week’s article are NVIDIA Corp. NVDA, Insulet Corp. PODD and Howmet Aerospace Inc. HWM.

Buy Profitable S&P 500 Stocks as the Index Tops 6K

On Monday, the S&P 500 eclipsed the coveted 6,000 mark, banking on the post-election rally. Donald Trump’s election victory has raised hopes of lower corporate taxes and deregulation, which helped the market benchmark to scale upward. The recent interest rate cuts by the Federal Reserve also boosted investors’ sentiment.

Thus, investors should make the most of the S&P 500’s upward trajectory by favoring profitable stocks over unprofitable ones. Investors should consider metrics like accounting ratios for performance assessment. We have selected the most successful and commonly used profitability ratio to evaluate a company’s performance.

To that end, NVIDIA Corp., Insulet Corp. and Howmet Aerospace Inc. have been selected as the top picks with a high net income ratio.

Net Income Ratio

The net income ratio shows a company’s profitability level. It reflects the percentage of net income to total sales revenues. Using the net income ratio, one can determine a firm’s effectiveness in meeting operating and non-operating expenses from revenues. A higher net income ratio usually implies a company’s ability to generate ample revenues and successfully manage all business functions.

These few parameters have narrowed the universe of more than 7,685 stocks to only 35.

Here are three of the 35 stocks that qualified for the screening:

NVIDIA

NVIDIA Corporation leads in visual computing technologies and invented the graphic processing unit or GPU. The 12-month net profit margin of NVDA is 55%.

The company’s expected earnings growth rate for the current year is 116.9%. NVIDIA Corporation currently has a Zacks Rank #2 (read more: NVIDIA Tops $3.5T Milestone - Good Time to Buy NVDA Stock?).

Insulet

Insulet is a leading developer, manufacturer and marketer of the Omnipod Insulin Management System. The 12-month net profit margin of PODD is 21.2%.

The company’s expected earnings growth rate for the current year is 12.7%. Insulet currently has a Zacks Rank #2.

Howmet Aerospace

Howmet Aerospace offers engineered solutions for customers in the transportation and aerospace industries. The 12-month net profit margin of HWM is 14.8%.

The company’s expected earnings growth rate for the current year is 41.9%. Howmet Aerospace currently has a Zacks Rank #2.

You can get the rest of the stocks on this list by signing up now for your 2-week free trial to the Research Wizard and start using this screen in your own trading. Further, you can also create your own strategies and test them first before taking the investment plunge.

The Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.

Click here to sign up for a free trial to the Research Wizard today.

For the rest of this Screen of the Week article please visit Zacks.com at: https://www.zacks.com/stock/news/2369189/buy-profitable-sp-500-stocks-as-the-index-tops-6000-nvidia-2-more?art_rec=quote-stock_overview-zacks_news-ID02-txt-2369189

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On Monday, the S&P 500 eclipsed the coveted 6,000 mark, banking on the post-election rally. Donald Trump’s election victory has raised hopes of lower corporate taxes and deregulation, which helped the market benchmark to scale upward. The recent interest rate cuts by the Federal Reserve also boosted investors’ sentiment.

Thus, investors should make the most of the S&P 500’s upward trajectory by favoring profitable stocks over unprofitable ones. Investors should consider metrics like accounting ratios for performance assessment. We have selected the most successful and commonly used profitability ratio to evaluate a company’s performance.

To that end, NVIDIA Corporation NVDA, Insulet Corporation PODD and Howmet Aerospace Inc. HWM have been selected as the top picks with a high net income ratio.

Net Income Ratio

The net income ratio shows a company’s profitability level. It reflects the percentage of net income to total sales revenues. Using the net income ratio, one can determine a firm’s effectiveness in meeting operating and non-operating expenses from revenues. A higher net income ratio usually implies a company’s ability to generate ample revenues and successfully manage all business functions.

Screening Parameters Using Research Wizard:

The net income ratio is not the only indicator of future winners. So, we have added a few more criteria to arrive at a winning strategy.

Zacks Rank Less than or equal to 2: Whether the market is good or bad, stocks with a Zacks Rank #1 (Strong Buy) or 2 (Buy) have a proven history of outperformance. You can see the complete list of today’s Zacks #1 Rank stocks here.

Trailing 12-Month Sales and Net Income Growth Higher than X Industry: Stocks that have witnessed higher-than-industry sales and net income growth in the past 12 months are positioned to perform well.

Trailing 12-Month Net Income Ratio Higher than X Industry: A high net income ratio indicates a company’s solid profitability.

Percentage Rating Strong Buy greater than 70: This indicates that 70% of the current broker recommendations for the stock are Strong Buy.

These few parameters have narrowed the universe of more than 7,685 stocks to only 35.

Here are three of the 35 stocks that qualified for the screening:

NVIDIA

NVIDIA Corporation leads in visual computing technologies and invented the graphic processing unit or GPU. The 12-month net profit margin of NVDA is 55%.

The company’s expected earnings growth rate for the current year is 116.9%. NVIDIA Corporation currently has a Zacks Rank #2 (read more: NVIDIA Tops $3.5T Milestone - Good Time to Buy NVDA Stock?).

Insulet

Insulet is a leading developer, manufacturer and marketer of the Omnipod Insulin Management System. The 12-month net profit margin of PODD is 21.2%.

The company’s expected earnings growth rate for the current year is 12.7%. Insulet currently has a Zacks Rank #2.

Howmet Aerospace

Howmet Aerospace offers engineered solutions for customers in the transportation and aerospace industries. The 12-month net profit margin of HWM is 14.8%.

The company’s expected earnings growth rate for the current year is 41.9%. Howmet Aerospace currently has a Zacks Rank #2.

You can get the rest of the stocks on this list by signing up now for your 2-week free trial to the Research Wizard and start using this screen in your own trading. Further, you can also create your own strategies and test them first before taking the investment plunge.

The Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.

Click here to sign up for a free trial to the Research Wizard today.

Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.

Disclosure: Performance information for Zacks’ portfolios and strategies are available at: https://www.zacks.com/performance.

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For new and old investors, taking full advantage of the stock market and investing with confidence are common goals. Zacks Premium provides lots of different ways to do both.

Featuring daily updates of the Zacks Rank and Zacks Industry Rank, full access to the Zacks #1 Rank List, Equity Research reports, and Premium stock screens, the research service can help you become a smarter, more self-assured investor.

Zacks Premium includes access to the Zacks Style Scores as well.

What are the Zacks Style Scores?

The Zacks Style Scores is a unique set of guidelines that rates stocks based on three popular investing types, and were developed as complementary indicators for the Zacks Rank. This combination helps investors choose securities with the highest chances of beating the market over the next 30 days.

Based on their value, growth, and momentum characteristics, each stock is assigned a rating of A, B, C, D, or F. The better the score, the better chance the stock will outperform; an A is better than a B, a B is better than a C, and so on.

The Style Scores are broken down into four categories:

Value Score

Finding good stocks at good prices, and discovering which companies are trading under their true value, are what value investors like to focus on. So, the Value Style Score takes into account ratios like P/E, PEG, Price/Sales, Price/Cash Flow, and a host of other multiples to highlight the most attractive and discounted stocks.

Growth Score

While good value is important, growth investors are more focused on a company's financial strength and health, and its future outlook. The Growth Style Score takes projected and historic earnings, sales, and cash flow into account to uncover stocks that will see long-term, sustainable growth.

Momentum Score

Momentum investors, who live by the saying "the trend is your friend," are most interested in taking advantage of upward or downward trends in a stock's price or earnings outlook. Utilizing one-week price change and the monthly percentage change in earnings estimates, among other factors, the Momentum Style Score can help determine favorable times to buy high-momentum stocks.

VGM Score

What if you like to use all three types of investing? The VGM Score is a combination of all Style Scores, making it one of the most comprehensive indicators to use with the Zacks Rank. It rates each stock on their combined weighted styles, which helps narrow down the companies with the most attractive value, best growth forecast, and most promising momentum.

How Style Scores Work with the Zacks Rank

A proprietary stock-rating model, the Zacks Rank utilizes the power of earnings estimate revisions, or changes to a company's earnings outlook, to help investors create a successful portfolio.

It's highly successful, with #1 (Strong Buy) stocks producing an unmatched +25.41% average annual return since 1988. That's more than double the S&P 500. But because of the large number of stocks we rate, there are over 200 companies with a Strong Buy rank, plus another 600 with a #2 (Buy) rank, on any given day.

This totals more than 800 top-rated stocks, and it can be overwhelming to try and pick the best stocks for you and your portfolio.

That's where the Style Scores come in.

To have the best chance of big returns, you'll want to always consider stocks with a Zacks Rank #1 or #2 that also have Style Scores of A or B, which will give you the highest probability of success. If you're looking at stocks with a #3 (Hold) rank, it's important they have Scores of A or B as well to ensure as much upside potential as possible.

The direction of a stock's earnings estimate revisions should always be a key factor when choosing which stocks to buy, since the Scores were created to work together with the Zacks Rank.

Here's an example: a stock with a #4 (Sell) or #5 (Strong Sell) rating, even one with Style Scores of A and B, still has a downward-trending earnings outlook, and a bigger chance its share price will decrease too.

Thus, the more stocks you own with a #1 or #2 Rank and Scores of A or B, the better.

Stock to Watch: Insulet (PODD)

Insulet Corporation is a leading developer, manufacturer and marketer of the Omnipod Insulin Management System. The system is equipped with a self-adhesive, small and lightweight disposable tubeless Omnipod device along with the wireless and handheld Personal Diabetes Manager (PDM). It is worn on the body for approximately three days at a time and allows virtually pain-free automated cannula insertion and blood glucose meter integration.

PODD is a #3 (Hold) on the Zacks Rank, with a VGM Score of B.

Additionally, the company could be a top pick for growth investors. PODD has a Growth Style Score of A, forecasting year-over-year earnings growth of 14.2% for the current fiscal year.

For fiscal 2024, four analysts revised their earnings estimate upwards in the last 60 days, and the Zacks Consensus Estimate has increased $0.10 to $3.14 per share. PODD boasts an average earnings surprise of 52.4%.

With a solid Zacks Rank and top-tier Growth and VGM Style Scores, PODD should be on investors' short list.

Zacks Investment Research

Insulet Corporation PODD reported third-quarter 2024 adjusted earnings per share (EPS) of 90 cents, up significantly 26.8% from the year-ago period’s figure. The bottom line surpassed the Zacks Consensus Estimate by 16.9%.

GAAP EPS was $1.08, up 45.9% from the year-ago figure of 74 cents.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

Following the earnings announcement, PODD’s share price surged 2.9% to $275.7 yesterday.

PODD’s Q3 Revenues

Revenues totaled $543.9 million, which beat the Zacks Consensus Estimate by 4.9%. The top line jumped 25.7% year over year (up 25.4% at the constant exchange rate or CER). CER growth exceeded the company’s guidance of 21%.

PODD’s Q3 Segmental Revenues

Insulet’s total Omnipod revenues of $533.6 million reflected an increase of 26.4% year over year (up 26.1% at CER). International Omnipod revenues of $138.0 million rose 36.1% (up 34.8% at CER). U.S. Omnipod revenues grew 23.4% year over year to $395.6 million.

The Drug Delivery business revenues totaled $10.3 million, flat year over year.

PODD’s Q3 Margins

Gross profit in the reported quarter was $377.1 million, up 28.6% from the prior-year quarter’s figure. Gross margin of 69.3% expanded 155 basis points year over year.

Selling, general & administrative expenses rose 29.6% to $234.1 million.

Research and development expenses declined 5.0% year over year to $54.9 million.

The operating profit in the quarter totaled $88.1 million, up 60.8% from the year-ago reported actuals. Operating margin of 16.2% expanded 353 basis points year over year.

Cash Position

Insulet exited the third quarter of 2024 with cash and cash equivalents of $902.6 million compared with $821 million at the end of the second quarter of 2024.

PODD’s 2024 Revenue Guidance

Insulet updated its full-year 2024 projection for revenues. It also issued top-line guidance for fourth-quarter 2024.

For 2024, the company now expects revenue growth to be between 20% and 21% (up from the previously projected 16-19%). The Zacks Consensus Estimate for total revenues is pegged at $2.01 billion, suggesting 18.6% growth from the 2023 reported number.

Insulet’s total Omnipod revenue growth is expected to be in the range of 21-22% (previously 18-21%). The company expects Drug Delivery revenues to decline 5-10% (previously 40-50%).

For the fourth quarter, Insulet projects revenue growth of 12-15%. The Zacks Consensus Estimate for total revenues is pegged at $564.5 million, suggesting 10.7% growth from the fourth quarter of 2023.

Total Omnipod revenues are likely to grow 13-16%. Drug Delivery revenue decline is expected to be in the range of 15-20% (approximately $7-$8 million).

Insulet Corporation Price, Consensus and EPS Surprise

Insulet Corporation price-consensus-eps-surprise-chart | Insulet Corporation Quote

Our Take

Insulet exited the third quarter of 2024 with better-than-expected earnings and revenues. The company benefited from continued high demand for Omnipod 5, both in the United States and globally. However, the lowering of the Drug Delivery guidance is discouraging.

During the reported quarter, Insulet received FDA clearance for Omnipod 5, making it the first and only automated insulin delivery system indicated for both type 1 and type 2 diabetes. Additionally, the company launched Omnipod 5 App for iPhone in the United States.

The expansion of both margins is encouraging. The raised 2024 revenue guidance instills optimism among investors.

PODD’s Zacks Rank and Other Key Picks

PODD currently carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks from the broader medical space are Phibro Animal Health PAHC, Quest Diagnostics DGX and HealthEquity HQY.

Phibro Animal Health reported fourth-quarter fiscal 2024 adjusted earnings of 41 cents per share, which topped the Zacks Consensus Estimate by 20.6%. Revenues of $273.2 million beat the Zacks Consensus Estimate by 4.1%. PAHC sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

PAHC’s fiscal 2025 earnings are expected to surge 31.9% compared with the industry’s 11.6% growth. The company’s earnings surpassed estimates in three of the trailing four quarters and missed the same in one, the average surprise being 4.1%.

Quest Diagnostics reported third-quarter 2024 adjusted earnings of $2.30 per share, which topped the Zacks Consensus Estimate by 1.8%. Revenues of $2.49 billion beat the consensus mark by 3.4%.

DGX carries a Zacks Rank #2 at present. DGX’s 2024 earnings are expected to surge 2.1% year over year. The company’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 3.3%.

HealthEquity, carrying a Zacks Rank #2 at present, reported a second-quarter fiscal 2025 adjusted earnings of 86 cents per share, which surpassed the Zacks Consensus Estimate by 22.9%. Revenues of $299.9 million topped the Zacks Consensus Estimate by 5.4%.

HQY has an estimated long-term earnings growth rate of 28.2% compared with the industry’s 13.4%. The company’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 19.8%.

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