3 ASX stocks boasting better margins than Nvidia

Think you can't find Nvidia-like margins among Aussie shares… think again.

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The green graphics card giant is making a motza. But did you know some ASX companies have even bigger profit margins than Nvidia Corp (NASDAQ: NVDA)?

Masterfully riding the AI wave, Nvidia looks like the Kelly Slater of computer hardware. The insatiable hunger for AI-enabling chips is fattening the technology company's profits. For 12 months ended January 2024, this A$3.4 trillion business pulled a 48.8% net margin.

For every dollar of revenue, Nvidia kept 49 cents — that's after tax!

Unsurprisingly, the share price is up 245% over the past year. Except, what if you wanted a slice of such profitability a little closer to home? I'm talking margin monsters like Nvidia on our local ASX bourse.

Nvidia-beating margins on the ASX

It's completely possible! There are 43 ASX-listed stocks with superior margins to Nvidia. However, I wouldn't count some of these due to quirky accounting practices. Still, if thick profit margins are your jam, plenty of options exist.

Here are a few Aussie companies that pass the high bar.

49% net margin: Not quite beating, but just as good as Nvidia is an ASX healthcare company named Pro Medicus Limited (ASX: PME). Its superb profits come from selling software to medical groups that allow large files to be viewed on any device.

In the 12 months ended 31 December 2023, Pro Medicus raked in $142.1 million in revenue and profits of $69.7 million. The company's margins have increased over the years due to the low additional cost of providing its software to more customers.

67% net margin: Any business that collects a royalty on something usually operates on high margins. There are minimal costs to eat away at the revenue gathered from sales. Deterra Royalties Ltd (ASX: DRR) is a locally-listed company relishing in this situation.

The lucrative enterprise comes from taking a royalty on iron ore sales from BHP Group Ltd's (ASX: BHP) Mining Area C mine. In the 12 months ended 31 December 2023, Deterra recorded $251.8 million in revenue and profits of $167.8 million.

68% net margin: Surpassing Nvidia's profit margin by 19% is an ASX biotech biz with rocketing revenues. The profit phenom I'm referring to is Neuren Pharmaceuticals Ltd (ASX: NEU), a drug developer that has reached commercial success with DAYBUE (trofinetide) treating Rett syndrome.

In the 12 months ended 31 December 2023, Neuren reached $231.9 million in revenue and profits of $157.1 million. It's a remarkable difference from a year earlier when revenue and earnings were $15.4 million and $184,000, respectively.

Motley Fool contributor Mitchell Lawler has positions in Pro Medicus. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Nvidia and Pro Medicus. The Motley Fool Australia has recommended Nvidia and Pro Medicus. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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