While profitability is essential, it doesn’t guarantee long-term success. Some companies that rest on their margins will lose ground as competition intensifies - as Jeff Bezos said, "Your margin is my opportunity".
Profits are valuable, but they’re not everything. At StockStory, we help you identify the companies that have real staying power. Keeping that in mind, here is one profitable company that leverages its financial strength to beat the competition and two that may struggle to keep up.
Two Stocks to Sell:
Charter (CHTR)
Trailing 12-Month GAAP Operating Margin: 24%
Operating as Spectrum, Charter (NASDAQ:CHTR) is a leading telecommunications company offering cable television, high-speed internet, and voice services across the United States.
Why Are We Cautious About CHTR?
- Number of internet subscribers has disappointed over the past two years, indicating weak demand for its offerings
- Projected sales for the next 12 months are flat and suggest demand will be subdued
- Low returns on capital reflect management’s struggle to allocate funds effectively
Charter’s stock price of $373.51 implies a valuation ratio of 9.7x forward price-to-earnings. If you’re considering CHTR for your portfolio, see our FREE research report to learn more.
Applied Industrial (AIT)
Trailing 12-Month GAAP Operating Margin: 11%
Formerly called The Ohio Ball Bearing Company, Applied Industrial (NYSE:AIT) distributes industrial products–everything from power tools to industrial valves–and services to a wide variety of industries.
Why Are We Hesitant About AIT?
- Organic revenue growth fell short of our benchmarks over the past two years and implies it may need to improve its products, pricing, or go-to-market strategy
- Estimated sales growth of 7% for the next 12 months is soft and implies weaker demand
- Free cash flow margin dropped by 2 percentage points over the last five years, implying the company became more capital intensive as competition picked up
Applied Industrial is trading at $241.17 per share, or 23.4x forward price-to-earnings. Dive into our free research report to see why there are better opportunities than AIT.
One Stock to Watch:
Ulta (ULTA)
Trailing 12-Month GAAP Operating Margin: 13.9%
Offering high-end prestige brands as well as lower-priced, mass-market ones, Ulta Beauty (NASDAQ:ULTA) is an American retailer that sells makeup, skincare, haircare, and fragrance products.
Why Do We Like ULTA?
- New store openings and solid same-store sales performance have boosted its top-line growth
- Brick-and-mortar locations are witnessing elevated demand as their same-store sales growth averaged 3.4% over the past two years
- ROIC punches in at 29.2%, illustrating management’s expertise in identifying profitable investments, and its returns are growing as it capitalizes on even better market opportunities
At $383.17 per share, Ulta trades at 16.4x forward price-to-earnings. Is now the time to initiate a position? Find out in our full research report, it’s free.
Stocks We Like Even More
Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.
While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.
Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Comfort Systems (+751% five-year return). Find your next big winner with StockStory today for free.