What Is Profitability Rating
The Profitability Rating is used to differentiate companies that have a strong financial base that yield profits over the next one to two years.
How to use Profitability
A high Profitability Rating (80 and above) indicates that the company has strong financial footing and can be expected to consistently yield profits now, and in the future. A company with low Profitability Rating (20 and below) is likely running at a loss, and is expected to do so for the next year or two.
Profitability can be viewed as the safest measure of investing. Even in down markets, the most profitable companies tend to be the ones that “weather the storm” the best overall. This also makes it hard to see large investment returns solely based on stock growth. This is because companies that have been profitable for a long time often do not have the same potential upside as companies with more inconsistent profits or growing pains. In other words, companies that are highly profitable have often already experienced their early growth phase, when stock prices start low and tend to move up.
More profitable companies can also come with higher dividends to add another layer of value. Earnings per share (EPS) or P/E (price to earnings) are two of the most classic stock valuation metrics. These metrics show how much the company is earning relative to its size and trading price. Stocks with high profitability may be less exciting short term, but shouldn't be ignored by savvy investors as a part of a healthy and balanced long term portfolio.
Update Frequency and Usage for Profitability Rating
Profitability Rating updates once per day. As this is based on the companies financials and estimates, which update slowly, checking this once per day and using the number whenever you see it is completely fine. If you do see a big move in this number it could mean great for the stock if it is going up or bad things if it is going down so always keep your eye on it.