5 Companies with Net Profit Margin above 20% for the Past 3 Years

Net Profit Margin measures how much profit did the company generated as a percentage of revenue received in that particular financial year. The formula to derive is as follow:

Profit After Tax/Total Revenue * 100

In general, the metric helps investors determine whether the respective company’s management is generating enough profit from its revenue and whether operating costs and overhead costs are being contained.

For example, a company can grow revenue at a fast clip but suffer from a poor net margin if its operating costs are increasing at a faster rate than revenue.

Typically, companies with a consistent Net Profit Margin of 20% and above demonstrates its ability to generate healthy profit level from its business operations and being able to control its business costs at the same time.

With that said, 5 such companies which have managed to achieve this in the past 3 years include:

• Fortress Minerals Limited (SGX: OAJ)

• Micro-Mechanics Holdings Limited (SGX: 5DD)

• TalkMed Group Limited (SGX: 5G3)

• VICOM Limited (SGX: WJP)

• Silverlake Axis Limited (SGX: 5CP)

1) Fortress Minerals Limited (SGX: OAJ)

Fortress Minerals Limited (“Fortress Minerals”) is a high-grade iron ore concentrate producer based in Malaysia. The Group is principally in the business of exploration, mining, production and sale of iron ore concentrates.

The Group presently produces magnetite iron ore concentrates with TFe grade of 65.0% and above, mined from the East, Valley and West Deposits in its Bukit Besi Mine, which is in Terengganu, Malaysia. Fortress Minerals sells its iron ore concentrates primarily to steel mills and trading companies in the People’s Republic of China (“PRC”) and Malaysia.

For the past 3 financial years, Fortress Minerals’ net profit margin has improved from 23.7% in FY2019 to 38.2% in FY2021. The consistent uptrend in its net profit margin can be attributed to higher sales volume and selling price of iron ore as well as a lower production costs across the years.

Fortress Minerals’ share price last traded at S$0.665, with a market capitalization of S$332.50 million.

2) Micro-Mechanics Holdings Limited (SGX: 5DD)

Micro-Mechanics Holdings Limited (“Micro-Mechanics") designs, manufactures and markets high precision tools and parts used in process-critical applications for the wafer-fabrication and assembly processes of the semiconductor industry.

In addition to designing and manufacturing a market-leading range of consumable tools and parts used in the assembly and testing of semiconductors, the Group also engages in the contract manufacturing of precision parts and tools used in process-critical applications for the semiconductor wafer-fabrication industry.

For the past 3 financial years, Micro-Mechanics' net profit margin fluctuated between 21.4% and 26.3%. For FY2020, its net profit margin improved to 22.8%, a 1.4 percentage points increase a year earlier. The higher net profit margin was mainly due to a lower tax expenses and higher revenue.

Micro-Mechanics’ share price last traded at S$3.13, with a market capitalization of S$435.17 million.

3) TalkMed Group Limited (SGX: 5G3)

TalkMed Group Limited (“TalkMed”) is a Singapore-based investment holding company. Its principal activities are the provision of medical oncology services and stem cell transplant services.

The Company's segments include Oncology services and Stem cells services. Its doctors provide tertiary healthcare services in the fields of medical oncology, stem cell transplant and palliative care to the oncology patients in the private sector in Singapore through Parkway Cancer Centre (“PCC”).

Despite the declining trend in its net profit margin, TalkMed has been able to keep the metrics at above 20% for the past 3 financial years.

For FY2020, its net profit margin stood at 36.6%, a decline of 10.4 percentage points due to the operating costs incurred during the pandemic. That said, the high net margins illustrate the profitability of the asset-light medical services sector.

TalkMed’s share price last traded at S$0.41, with a market capitalization of S$541.24 million.

4) VICOM Limited (SGX: WJP)

VICOM Limited (“VICOM”) is a Singapore-based investment holding company. Its principal activities include the provision of motor vehicle evaluation and other related services. The Company is also engaged in the business of testing services, which include the provision of motor vehicle inspection services and provision of non-vehicle testing, inspection and consultancy services.

The Company also provides various services, such as vehicle assessment, emission test laboratory, motor insurance, road tax renewal and other services.

For the past 3 financial years, VICOM has recorded a net profit margin of between 27.3% and 34.6%. For FY2020, its net profit margin stood at 28.3%, an improvement of 1 percentage point from a year earlier.

This is achieved despite the lower revenue in FY2020 mainly due to lower staff costs and Covid-19 related support from the government.

VICOM’s share price last traded at S$2.06, with a market capitalization of S$730.41 million.

5) Silverlake Axis Limited (SGX: 5CP)

Silverlake Axis Limited (“Silverlake Axis”) provides software solutions and services to the Banking, Insurance, Retail, Government, Payment and Logistics industries. Founded in 1989, SAL has an impeccable track record of successful delivery of innovative and transformative solutions to its enterprise customers and their ecosystems.

The Group has more than 380 enterprise customers in over 80 countries across Asia, Europe, Middle East, Africa and Americas.

For the past 3 financial years, Silverlake Axis’ net profit margin came in at between 24.7% and 36.0%. For FY2020, its net profit margin was at 27.8%, a decrease of 8.2 percentage points from a year earlier.

The decline was mainly attributed to the higher cost of sales, administrative expenses and higher finance costs.

Silverlake Axis’ share price last traded at S$0.245, with a market capitalization of S$655.59 million.

Conclusion

To summarize, the net profit margin metric help investors quickly gauge on the profitability level of the company. However, the metrics can be influenced by one-off items such as the sale of an asset, which would temporarily boost profits.

Therefore, it is best for investors to utilise other financial metrics such as free cash flow and liquidity ratio when conducting a comprehensive analysis on each individual company.

Join over 3,500 investors on our Telegram channel here: https://rebrand.ly/dab7ea