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".
A business making money today isn’t necessarily a winner, which is why we analyze companies across multiple dimensions at StockStory. Keeping that in mind, here is one profitable company that leverages its financial strength to beat the competition and two that may struggle to keep up.
Two Stocks to Sell:
Otis (OTIS)
Trailing 12-Month GAAP Operating Margin: 13.1%
Credited with inventing the first hydraulic passenger elevator, Otis Worldwide (NYSE: OTIS) is an elevator and escalator manufacturing, installation and service company.
Why Are We Hesitant About OTIS?
- Absence of organic revenue growth over the past two years suggests it may have to lean into acquisitions to drive its expansion
- Estimated sales growth of 4.2% for the next 12 months is soft and implies weaker demand
- Free cash flow margin shrank by 2 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
At $91.47 per share, Otis trades at 22x forward P/E. To fully understand why you should be careful with OTIS, check out our full research report (it’s free for active Edge members).
The Pennant Group (PNTG)
Trailing 12-Month GAAP Operating Margin: 5.5%
Spun off from The Ensign Group in 2019 to focus on non-skilled nursing healthcare services, Pennant Group (NASDAQ: PNTG) operates home health, hospice, and senior living facilities across 13 western and midwestern states, serving patients of all ages including seniors.
Why Does PNTG Give Us Pause?
- Smaller revenue base of $798.9 million means it hasn’t achieved the economies of scale that some industry juggernauts enjoy
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 1.2% for the last five years
- Underwhelming 5.7% return on capital reflects management’s difficulties in finding profitable growth opportunities
The Pennant Group’s stock price of $24.24 implies a valuation ratio of 20x forward P/E. If you’re considering PNTG for your portfolio, see our FREE research report to learn more.
One Stock to Buy:
The Trade Desk (TTD)
Trailing 12-Month GAAP Operating Margin: 17.7%
Built as an alternative to "walled garden" advertising ecosystems, The Trade Desk (NASDAQ: TTD) provides a cloud-based platform that helps advertisers and agencies plan, manage, and optimize digital advertising campaigns across multiple channels and devices.
Why Do We Love TTD?
- Annual revenue growth of 24.4% over the last two years was superb and indicates its market share is rising
- Billings have averaged 22.6% growth over the last year, showing it’s securing new contracts that could potentially increase in value over time
- User-friendly software enables clients to ramp up spending quickly, leading to the speedy recovery of customer acquisition costs
The Trade Desk is trading at $50.97 per share, or 8.3x forward price-to-sales. Is now a good time to buy? Find out in our full research report, it’s free for active Edge members.
High-Quality Stocks for All Market Conditions
When Trump unveiled his aggressive tariff plan in April 2025, markets tanked as investors feared a full-blown trade war. But those who panicked and sold missed the subsequent rebound that’s already erased most losses.
Don’t let fear keep you from great opportunities and take a look at Top 5 Growth Stocks for this month. 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 Exlservice (+354% 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
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