With the stock market in correction mode, investors are looking to put their money into relatively stable companies, like mega-cap stocks.
Why? Mega-cap stocks have been around for many years and have survived several economic downturns, which is why investors flock to these stocks during times of economic uncertainty.
But which mega-cap stock is best for your portfolio? One way to get a closer look at the segment is to determine how profitable the companies are compared to their industry. Learn more below.
Profitability
To analyze the profitability of these stocks, we compared the companies' gross, operating, and profit margins with their industry averages to find those more profitable than their peers.
Trailing-12-month gross margin: This metric that tells us the percentage of its revenue a company retains after paying all production expenses. Costs include overhead, payroll, and taxation.
Gross margin % = ((revenue - cost of goods sold) / revenue)) X 100
TTM operating margin: This tells us the percentage remaining after all operating expenses are paid. Operating expenses include supplies, repairs, research and development, and depreciation.
Operating margin % = (operating income / net operating revenue) X 100
TTM pre-tax margin: A company's earnings before taxes. This incorporates all of the expenses associated with business, excluding taxes. It can help to determine the overall operating efficiency of the firm. The higher the pre-tax margin, the more profitable the company is.
Pre-tax margin % = (net profit before taxes / net sales) X 100
Business section: investing ideas
We began this screen with mega-cap companies, and then we compared their profitability margins to their industry. Those remaining are the ones with the best margins. Do you think these stocks will continue to be strong performers? (Click here to access free, interactive tools to analyze these ideas.)
1. Philip Morris International (NYSE: PM) manufactures and sells cigarettes and other tobacco products in markets outside of the U.S. Its market cap is $145.64 billion, with a most recent closing price of $85.34. Its TTM gross margin is 68.69%, versus an industry average of 62.17%. Its TTM operating margin is 43.55%, versus an industry average of 36.89%. Its TTM pre-tax margin is 40.71%, versus an industry average of 32.69%.
2. Intel (Nasdaq: INTC) designs, manufactures, and sells integrated circuits for computing and communications industries worldwide. Its market cap is $135.94 billion, with a most recent closing price of $26.96. Its TTM gross margin is 74.58%, versus an industry average of 60.12%. Its TTM operating margin is 31.83%, versus an industry average of 22.29%. Its TTM pre-tax margin is 31.86%, versus an industry average of 20.54%.
3. Companhia de Bebidas Das Americas (NYSE: ABV) produces, distributes, and sells beer, draft beer, carbonated soft drinks, malt, and other nonalcoholic and noncarbonated products in the Americas. Its market cap is $120.95 billion, with a most recent closing price of $38.91. Its TTM gross margin is 67.62%, versus an industry average of 59.19%. Its TTM operating margin is 40.13%, versus an industry average of 23.66%. Its TTM pre-tax margin is 41.31%, versus an industry average of 22.91%.
4. QUALCOMM Incorporated (Nasdaq: QCOM) develops, designs, manufactures, and markets digital wireless telecommunications products and services. Its market cap is $105.36 billion, with a most recent closing price of $61.57. Its TTM gross margin is 69.31%, versus an industry average of 59.58%. Its TTM operating margin is 32.07%, versus an industry average of 19.65%. Its TTM pre-tax margin is 34.86%, versus an industry average of 19.36%.
5. McDonald's operates as a fast-food retailer worldwide. Its market cap is $92.36 billion, with a most recent closing price of $91.18. Its TTM gross margin is 44.84%, versus an industry average of 35.48%. Its TTM operating margin is 30.76%, versus an industry average of 18.57%. Its TTM pre-tax margin is 29.74%, versus an industry average of 17.46%.
6. Mastercard provides transaction processing and related services to customers, principally in support of their credit, deposit access, electronic cash, and ATM payment card programs, as well as traveler's check programs. Its market cap is $52.38 billion, with a most recent closing price of $415.78. Its TTM gross margin is 55.3%, versus an industry average of 49.53%. Its TTM operating margin is 52.35%, versus an industry average of 28.01%. Its TTM pre-tax margin is 41.73%, versus an industry average of 26.86%.
7. Southern Company is a utility company that provides electric service in the southeastern U.S. Its market cap is $39.48 billion, with a most recent closing price of $45.45. Its TTM gross margin is 34.11%, versus an industry average of 26.27%. Its TTM operating margin is 24.02%, versus an industry average of 17.62%. Its TTM pre-tax margin is 19.72%, versus an industry average of 12.44%.
8. Monsanto (NYSE: MON) provides agricultural products for farmers in the U.S. and internationally. Its market cap is $38.14 billion, with a most recent closing price of $72.79. Its TTM gross margin is 56.43%, versus an industry average of 37.23%. Its TTM operating margin is 22.99%, versus an industry average of 16.93%. Its TTM pre-tax margin is 21.8%, versus an industry average of 15.95%.
9. Canadian National Railway engages in the rail and related transportation business in North America. Its market cap is $35.78 billion, with a most recent closing price of $81.57. Its TTM gross margin is 46.76%, versus an industry average of 36.65%. Its TTM operating margin is 37.11%, versus an industry average of 26.93%. Its TTM pre-tax margin is 37.66%, versus an industry average of 23.89%.
10. BlackRock provides its services to institutional, intermediary, and individual investors. Its market cap is $31.69 billion, with a most recent closing price of $178.27. Its TTM gross margin is 40.45%, versus an industry average of 33.24%. Its TTM operating margin is 37.15%, versus an industry average of 30.45%. Its TTM pre-tax margin is 34.92%, versus an industry average of 21.38%.
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.
