Sandisk & 2 Profitable Stocks to Buy Now for Explosive Upside

The artificial intelligence (AI) boom and upbeat corporate earnings have driven the broader S&P 500 close to record highs in August, with strong momentum expected to continue into September. Banking on this optimism, investors should focus on companies that consistently generate strong profits after accounting for both operating and non-operating expenses. 

Such companies are generally better positioned to benefit from favorable market conditions than those reporting losses. To evaluate a company’s profitability, investors often use profitability ratios, which help measure its ability to generate consistent and sustainable earnings. 

On that note, Sandisk Corporation SNDK, Celestica Inc. CLS and BrightSpring Health Services, Inc. BTSG stand out as the most profitable stocks, supported by strong net income ratios and upside potential.    

Importance of Net Income Ratio for Investors 

The net income ratio is a key indicator of a company’s overall profitability. It reflects the percentage of net income relative to total sales revenues. Using the net income ratio, one can assess a firm’s ability to cover operating and non-operating expenses with revenues. A higher net income ratio usually implies a company’s ability to generate sufficient revenue and manage all business functions effectively.

Stock Screening Parameters Used in 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 equal to #1: Whether the market is good or bad, stocks with a Zacks Rank #1 (Strong 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 17. 

Here are three of the 17 stocks that qualified for the screening:

Sandisk 

Sandisk develops and sells NAND flash-based data storage devices and solutions worldwide. SNDK’s 12-month net profit margin is 56.5%. Sandisk’s expected earnings growth rate for the current year is 200.9% (read more: Everyone's Watching NVIDIA - But Is Sandisk the Real AI Winner?). 

Celestica 

Celestica and its subsidiaries provide supply-chain solutions across Asia, North America, and global markets. Celestica’s 12-month net profit margin is 7.2%. Celestica’s expected earnings growth rate for the current year is 80.2%. 

BrightSpring Health Services 

BrightSpring Health Services provides home and community-based healthcare services across the United States. BTSG’s 12-month net profit margin is 2.6%. BTSG’s expected earnings growth rate for the current year is 82%. 

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This article originally published on Zacks Investment Research (zacks.com).

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