Not all profitable companies are built to last - some rely on outdated models or unsustainable advantages.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.
Profits are valuable, but they’re not everything. At StockStory, we help you identify the companies that have real staying power. Keeping that in mind, here is one profitable company that generates reliable profits without sacrificing growth and two that may face some trouble.
Two IndustrialsStocks to Sell:
Deere (DE)
Trailing 12-Month GAAP Operating Margin: 16.9%
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 Do We Avoid DE?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 14% annually over the last two years
- Earnings per share decreased by more than its revenue over the last two years, showing each sale was less profitable
- 6× net-debt-to-EBITDA ratio makes lenders less willing to extend additional capital, potentially necessitating dilutive equity offerings
At $520.97 per share, Deere trades at 26.6x forward P/E. If you’re considering DE for your portfolio, see our FREE research report to learn more.
Oshkosh (OSK)
Trailing 12-Month GAAP Operating Margin: 8.8%
Oshkosh (NYSE: OSK) manufactures specialty vehicles for the defense, fire, emergency, and commercial industry, operating various brand subsidiaries within each industry.
Why Are We Cautious About OSK?
- Sales pipeline suggests its future revenue growth may not meet our standards as its average backlog growth of 4% for the past two years was weak
- Projected sales are flat for the next 12 months, implying demand will slow from its two-year trend
- Free cash flow margin shrank by 9.4 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
Oshkosh is trading at $124.21 per share, or 11.5x forward P/E. Check out our free in-depth research report to learn more about why OSK doesn’t pass our bar.
One Industrials Stock to Watch:
CACI (CACI)
Trailing 12-Month GAAP Operating Margin: 9%
Founded to commercialize SIMSCRIPT, CACI International (NYSE: CACI) offers defense, intelligence, and IT solutions to support national security and government transformation efforts.
Why Do We Like CACI?
- Backlog has averaged 13% growth over the past two years, showing it has a pipeline of unfulfilled orders that will support revenue in the future
- Sales outlook for the upcoming 12 months implies the business will stay on its desirable two-year growth trajectory
- Share repurchases over the last two years enabled its annual earnings per share growth of 16.9% to outpace its revenue gains
CACI’s stock price of $489.02 implies a valuation ratio of 18.4x forward P/E. Is now the time to initiate a position? See for yourself in our in-depth research report, it’s free.
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