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".

Not all profitable companies are created equal, and that’s why we built StockStory - to help you find the ones that truly shine bright. That said, here are two profitable companies that leverage their financial strength to beat the competition and one best left off your watchlist.

One Stock to Sell:

CarMax (KMX)

Trailing 12-Month GAAP Operating Margin: 3.2%

Known for its transparent, customer-centric approach and wide selection of vehicles, Carmax (NYSE: KMX) is the largest automotive retailer in the United States.

Why Do We Steer Clear of KMX?

1. Disappointing same-store sales over the past two years show customers aren’t responding well to its product selection and store experience
2. Commoditized inventory, bad unit economics, and high competition are reflected in its low gross margin of 10.8%
3. High net-debt-to-EBITDA ratio of 16× could force the company to raise capital at unfavorable terms if market conditions deteriorate

CarMax’s stock price of $65.20 implies a valuation ratio of 16.6x forward P/E. If you’re considering KMX for your portfolio, see our FREE research report to learn more.

Two Stocks to Watch:

Herc (HRI)

Trailing 12-Month GAAP Operating Margin: 18.1%

Formerly a subsidiary of Hertz Corporation and with a logo that still bears some similarities to its former parent, Herc Holdings (NYSE: HRI) provides equipment rental and related services to a wide range of industries.

Why Are We Fans of HRI?

1. Annual revenue growth of 13.1% over the past five years was outstanding, reflecting market share gains this cycle
2. Healthy operating margin of 18.5% shows it’s a well-run company with efficient processes, and its operating leverage amplified its profits over the last five years
3. Share repurchases have amplified shareholder returns as its annual earnings per share growth of 26.5% exceeded its revenue gains over the last five years

At $136.10 per share, Herc trades at 10.6x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.

Arch Capital Group (ACGL)

Trailing 12-Month GAAP Operating Margin: 21.9%

With roots dating back to 1995 and now operating across insurance markets on six continents, Arch Capital Group (NASDAQ: ACGL) provides specialty insurance, reinsurance, and mortgage insurance services worldwide through its three main business segments.

Why Is ACGL a Good Business?

1. Annual net premiums earned growth of 23.3% over the past two years was outstanding, reflecting market share gains this cycle
2. Share repurchases over the last five years enabled its annual earnings per share growth of 25.9% to outpace its revenue gains
3. Impressive 16.2% annual book value per share growth over the last five years indicates it’s building equity value this cycle

Arch Capital Group is trading at $90.57 per share, or 1.5x forward P/B. Is now the right time to buy? See for yourself in our in-depth 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 6 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-small-cap company Comfort Systems (+782% 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

StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.