Looking for stocks that have strong profitability and the support of company insiders? Here are some ideas to get you started.
Profitability margins such as gross margin are helpful to gauge how much profits a company is taking from its revenues. Specifically, gross margin is the profit after deducting "cost of goods sold," which includes inventory. Therefore companies with higher gross margins are more profitable and have a greater control of their costs.
For companies that sell physical inventory, gross margin is a very important measure because cost of goods sold is usually the largest expense on the income statement.
Investment ideas
We ran a screen for stocks with high profitability by searching for those that are seeing consistent increases in gross margin over the last four years, indicating that the stocks are keeping a greater portion of revenue as profits.
We then screened these stocks for those with significant net insider buying over the last six months, which indicates that company insiders such as upper management believe in the company's outlook.
Do you think these insiders are calling it right on their companies?
(Click here to access free, interactive tools to analyze these ideas.)
1. Solar Capital
Over the last six months, insiders were net buyers of 115,000 shares, which represents about 0.41% of the company's 27.91M share float.
2. Genomic Health
Over the last six months, insiders were net buyers of 554,745 shares, which represents about 2.06% of the company's 26.92M share float.
3. USA Mobility
Over the last six months, insiders were net buyers of 6,743 shares, which represents about 0.04% of the company's 18.59M share float.
4. ITT Educational Services
Over the last six months, insiders were net buyers of 374,000 shares, which represents about 2.08% of the company's 17.96M share float.
5. Lincoln Educational Services
Over the last six months, insiders were net buyers of 291,384 shares, which represents about 1.38% of the company's 21.18M share float.
6. Level 3 Communications
Over the last six months, insiders were net buyers of 123,580 shares, which represents about 0.08% of the company's 152.61M share float.
7. Neoprobe
Over the last six months, insiders were net buyers of 100,320 shares, which represents about 0.12% of the company's 82.84M share float.
8. STAAR Surgical
Over the last six months, insiders were net buyers of 11,927 shares, which represents about 0.05% of the company's 25.37M share float.
9. Aeroflex Holding Corp.
Over the last six months, insiders were net buyers of 23,795 shares, which represents about 0.03% of the company's 69.46M share float.
10. Opko Health
Over the last six months, insiders were net buyers of 6,854,500 shares, which represents about 5.19% of the company's 132.12M share float.
Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.
List compiled by Eben Esterhuizen, CFA. Kapitall's Alexander Crawford and Eben Esterhuizen do not own any of the shares mentioned above. Insider data sourced from Yahoo! Finance. Gross margin data from Google Finance.