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 that may struggle to keep up.
One Stock to Sell:
LSI (LYTS)
Trailing 12-Month GAAP Operating Margin: 6.3%
Enhancing commercial environments, LSI (NASDAQ: LYTS) provides lighting and display solutions for businesses and retailers.
Why Are We Hesitant About LYTS?
- 4.5% annual revenue growth over the last two years was slower than its industrials peers
- Performance over the past two years was negatively impacted by new share issuances as its earnings per share grew slower than its revenue
- Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 5.9 percentage points
LSI’s stock price of $19.38 implies a valuation ratio of 16.2x forward P/E. Dive into our free research report to see why there are better opportunities than LYTS.
Two Stocks to Watch:
AppLovin (APP)
Trailing 12-Month GAAP Operating Margin: 52%
Co-founded by Adam Foroughi, who was frustrated with not being able to find a good solution to market his own dating app, AppLovin (NASDAQ: APP) is both a mobile game studio and provider of marketing and monetization tools for mobile app developers.
Why Should You Buy APP?
- Software platform has product-market fit given the rapid recovery of its customer acquisition costs
- Disciplined cost controls and effective management resulted in a strong trailing 12-month operating margin of 52%, and its profits increased over the last year as it scaled
- APP is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders
AppLovin is trading at $434.38 per share, or 23.8x forward price-to-sales. Is now a good time to buy? See for yourself in our in-depth research report, it’s free.
CBIZ (CBZ)
Trailing 12-Month GAAP Operating Margin: 11.2%
With over 120 offices across 33 states and a team of more than 6,700 professionals, CBIZ (NYSE: CBZ) provides accounting, tax, benefits, insurance brokerage, and advisory services to help small and mid-sized businesses manage their finances and operations.
Why Do We Like CBZ?
- Annual revenue growth of 26.6% over the last two years was superb and indicates its market share increased during this cycle
- Market share is on track to rise over the next 12 months as its 45.6% projected revenue growth implies demand will accelerate from its two-year trend
- Earnings per share have massively outperformed its peers over the last two years, increasing by 29.6% annually
At $62.60 per share, CBIZ trades at 16.2x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
Trump’s April 2025 tariff bombshell triggered a massive market selloff, but stocks have since staged an impressive recovery, leaving those who panic sold on the sidelines.
Take advantage of the rebound by checking out our Top 9 Market-Beating Stocks. 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).
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