Not all profitable companies are built to last - some rely on outdated models or unsustainable advantages.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. That said, here is one profitable company that balances growth and profitability and two that may face some trouble.
Two Stocks to Sell:
Deere (DE)
Trailing 12-Month GAAP Operating Margin: 15.6%
Revolutionizing agriculture with the first self-polishing cast-steel plow in the 1800s, Deere (NYSE: DE) manufactures and distributes advanced agricultural, construction, forestry, and turf care equipment.
Why Does DE Give Us Pause?
- Annual sales declines of 16.4% for the past two years show its products and services struggled to connect with the market during this cycle
- Earnings per share decreased by more than its revenue over the last two years, showing each sale was less profitable
- 7× net-debt-to-EBITDA ratio shows it’s overleveraged and increases the probability of shareholder dilution if things turn unexpectedly
Deere is trading at $487.80 per share, or 23.7x forward P/E. Read our free research report to see why you should think twice about including DE in your portfolio.
Vicor (VICR)
Trailing 12-Month GAAP Operating Margin: 4.2%
Founded by a researcher at the Massachusetts Institute of Technology, Vicor (NASDAQ: VICR) provides electrical power conversion and delivery products for a range of industries.
Why Does VICR Fall Short?
- New orders were hard to come by as its backlog was flat over the past two years
- Day-to-day expenses have swelled relative to revenue over the last five years as its operating margin fell by 10.9 percentage points
- Waning returns on capital imply its previous profit engines are losing steam
At $52.13 per share, Vicor trades at 41.7x forward P/E. If you’re considering VICR for your portfolio, see our FREE research report to learn more.
One Stock to Buy:
Progressive (PGR)
Trailing 12-Month GAAP Operating Margin: 15.9%
Starting as a small auto insurance company in 1937 with a pioneering focus on high-risk drivers, Progressive (NYSE: PGR) is a major auto, property, and commercial insurance provider that offers policies through independent agents, online platforms, and over the phone.
Why Do We Love PGR?
- Market penetration was impressive this cycle as its net premiums earned expanded by 20.3% annually over the last two years
- Impressive 41.7% annual book value per share growth over the last two years indicates it’s building equity value this cycle
- Capital strength will likely rise over the next 12 months as its expected book value per share growth of 24.9% is robust
Progressive’s stock price of $246.42 implies a valuation ratio of 4.1x forward P/B. Is now the right time to buy? Find out in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
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