Screen of the Week written by Kevin Matras of Zacks Investment Research:

As another earnings season gets into full swing, I've been running screens with this concept: to find companies that have just recently shown their first quarterly profit within the last year. The idea is to find companies that have not shown a profit for at least the previous 4 quarters, but have just recently produced their first profit this last quarter.

Some of these companies will be relatively new and this recent profit may be the only profit in the company's history – so far. For others, they may have a long history of profitability, but have seen a contraction over the last year as the recession raged, and have finally returned to profitability.

I like this concept because if the trend has been one of improvement, there's a good chance that trend will continue. This is true whether you've been profitable or are just getting profitable.

But some (like myself for example) dislike buying companies that cannot show a profit. And there are many others who won't even consider a stock unless it's making money. Losing less than the previous quarter is indeed an improvement. And in that respect, by definition, it is growth, i.e., they're growing less unprofitable. What's even better is if the losses are less and less in each sequential quarter.

But there's something entirely different about growth AND being profitable. And those are the stocks that will likely see the best new demand from new investors.

And that's what we're screening for today...

For the rest of this Screen of the Week article, please visit Zacks.com at: http://www.zacks.com/commentary/15795/

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