Companies with solid operating margins have a competitive edge, allowing them to reinvest for sustainable expansion. The best of these businesses balance profitability with reinvestment, setting themselves up for long-term success.
Not all profitable companies are worth your attention, but we’re here to highlight the ones with the most upside. That said, here are three profitable companies that balance growth and profitability.
Gorman-Rupp (GRC)
Trailing 12-Month GAAP Operating Margin: 15%
Powering fluid dynamics since 1934, Gorman-Rupp (NYSE: GRC) has evolved from its Ohio origins into a global manufacturer and seller of pumps and pump systems.
Why Will GRC Outperform?
- Annual revenue growth of 14.7% over the past five years was outstanding, reflecting market share gains this cycle
- Incremental sales over the last two years have been highly profitable as its earnings per share increased by 28% annually, topping its revenue gains
- Free cash flow margin increased by 12.1 percentage points over the last five years, giving the company more capital to invest or return to shareholders
Gorman-Rupp’s stock price of $74.99 implies a valuation ratio of 25x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
Hexcel (HXL)
Trailing 12-Month GAAP Operating Margin: 11.5%
Founded shortly after World War II by a group of engineers from UC Berkley, Hexcel (NYSE: HXL) manufactures lightweight composite materials primarily for the aerospace and defense sectors.
Why Is HXL Interesting?
- Estimated revenue growth of 10.7% for the next 12 months implies demand will accelerate from its two-year trend
- Performance over the past five years was turbocharged by share buybacks, which enabled its earnings per share to grow faster than its revenue
- Free cash flow margin increased by 7.9 percentage points over the last five years, giving the company more capital to invest or return to shareholders
At $92.45 per share, Hexcel trades at 35.3x forward P/E. Is now a good time to buy? See for yourself in our in-depth research report, it’s free.
Taboola (TBLA)
Trailing 12-Month GAAP Operating Margin: 6.5%
Often appearing as those "You May Also Like" or "Recommended For You" boxes at the bottom of news articles, Taboola (NASDAQ: TBLA) operates a digital platform that recommends personalized content to users across publisher websites, helping both publishers monetize their sites and advertisers reach target audiences.
Why Does TBLA Stand Out?
- Annual revenue growth of 10% over the last two years was superb and indicates its market share increased during this cycle
- Free cash flow margin expanded by 8.4 percentage points over the last five years, providing additional flexibility for investments and share buybacks/dividends
- Historical investments are beginning to pay off as its returns on capital are growing
Taboola is trading at $3.86 per share, or 5.2x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
Stocks We Like Even More
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