Not all profitable companies are built to last - some rely on outdated models or unsustainable advantages. Just because a business is in the green today doesn’t mean it will thrive tomorrow.
A business making money today isn’t necessarily a winner, which is why we analyze companies across multiple dimensions at StockStory. Keeping that in mind, here is one profitable company that generates reliable profits without sacrificing growth and two that may face some trouble.
Two Stocks to Sell:
Gray Television (GTN)
Trailing 12-Month GAAP Operating Margin: 22.7%
Specializing in local media coverage, Gray Television (NYSE: GTN) is a broadcast company supplying digital media to various markets in the United States.
Why Do We Pass on GTN?
- Products and services fail to spark excitement with consumers, as seen in its flat sales over the last two years
- Projected sales decline of 11.7% for the next 12 months points to an even tougher demand environment ahead
- Capital intensity will likely ramp up in the next year as its free cash flow margin is expected to contract by 8.3 percentage points
Gray Television’s stock price of $4.57 implies a valuation ratio of 0.8x forward EV-to-EBITDA. Check out our free in-depth research report to learn more about why GTN doesn’t pass our bar.
MGIC Investment (MTG)
Trailing 12-Month GAAP Operating Margin: 80.6%
Founded in 1957 when the modern mortgage insurance industry was in its infancy, MGIC Investment (NYSE: MTG) provides private mortgage insurance that protects lenders when homebuyers default on their loans, enabling borrowers to purchase homes with smaller down payments.
Why Does MTG Worry Us?
- Net premiums earned tumbled by 1.1% annually over the last four years, showing market trends are working against its favor during this cycle
- Costs have risen faster than its revenue over the last two years, causing its combined ratio to worsen by 20 percentage points
- Earnings growth over the last two years fell short of the peer group average as its EPS only increased by 2.8% annually
At $27.67 per share, MGIC Investment trades at 1.2x forward P/B. Dive into our free research report to see why there are better opportunities than MTG.
One Stock to Watch:
Merck (MRK)
Trailing 12-Month GAAP Operating Margin: 31.5%
With roots dating back to 1891 and a portfolio that includes the blockbuster cancer immunotherapy Keytruda, Merck (NYSE: MRK) develops and sells prescription medicines, vaccines, and animal health products across oncology, infectious diseases, cardiovascular, and other therapeutic areas.
Why Are We Positive On MRK?
- Dominant market position is represented by its $63.92 billion in revenue, which creates significant barriers to entry in this highly regulated industry
- Free cash flow margin jumped by 10.7 percentage points over the last five years, giving the company more resources to pursue growth initiatives, repurchase shares, or pay dividends
- Industry-leading 15.6% return on capital demonstrates management’s skill in finding high-return investments
Merck is trading at $79 per share, or 8.7x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.
While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio by checking out 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 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today
