Even if a company is profitable, it doesn’t always mean it’s a great investment. Some struggle to maintain growth, face looming threats, or fail to reinvest wisely, limiting their future potential.
Not all profitable companies are created equal, and that’s why we built StockStory - to help you find the ones that truly shine bright. Keeping that in mind, here is one profitable company that leverages its financial strength to beat the competition and two that may face some trouble.
Two Stocks to Sell:
Frontdoor (FTDR)
Trailing 12-Month GAAP Operating Margin: 19.3%
Established in 2018 as a spin-off from ServiceMaster Global Holdings, Frontdoor (NASDAQ: FTDR) is a provider of home warranty and service plans.
Why Does FTDR Worry Us?
- Sluggish trends in its home service plans suggest customers aren’t adopting its solutions as quickly as the company hoped
- Anticipated sales growth of 6.8% for the next year implies demand will be shaky
- Projected 1.2 percentage point decline in its free cash flow margin next year reflects the company’s plans to increase its investments to defend its market position
Frontdoor is trading at $51.14 per share, or 12.1x forward P/E. If you’re considering FTDR for your portfolio, see our FREE research report to learn more.
Northrop Grumman (NOC)
Trailing 12-Month GAAP Operating Margin: 10.6%
Responsible for the development of the first stealth bomber, Northrop Grumman (NYSE: NOC) specializes in providing aerospace, defense, and security solutions for various industry applications.
Why Do We Avoid NOC?
- Organic sales performance over the past two years indicates the company may need to make strategic adjustments or rely on M&A to catalyze faster growth
- Expenses have increased as a percentage of revenue over the last five years as its operating margin fell by 5.7 percentage points
- Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability
Northrop Grumman’s stock price of $558.75 implies a valuation ratio of 20.2x forward P/E. Dive into our free research report to see why there are better opportunities than NOC.
One Stock to Watch:
LSI (LYTS)
Trailing 12-Month GAAP Operating Margin: 6.6%
Enhancing commercial environments, LSI (NASDAQ: LYTS) provides lighting and display solutions for businesses and retailers.
Why Are We Positive On LYTS?
- Market share has increased this cycle as its 15.6% annual revenue growth over the last five years was exceptional
- Operating profits and efficiency rose over the last five years as it benefited from some fixed cost leverage
- Earnings per share grew by 50.7% annually over the last five years, massively outpacing its peers
At $18.41 per share, LSI trades at 14.9x forward P/E. 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
Your portfolio can’t afford to be based on yesterday’s story. The risk in a handful of heavily crowded stocks is rising daily.
The names generating the next wave of massive growth are right here in our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+351% 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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