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".
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 are two profitable companies that generate reliable profits without sacrificing growth and one that may face some trouble.
One Stock to Sell:
LKQ (LKQ)
Trailing 12-Month GAAP Operating Margin: 8.2%
A global distributor of vehicle parts and accessories, LKQ (NASDAQ: LKQ) offers its customers a comprehensive selection of high-quality, affordably priced automobile products.
Why Do We Think LKQ Will Underperform?
- Organic revenue growth fell short of our benchmarks over the past two years and implies it may need to improve its products, pricing, or go-to-market strategy
- Forecasted free cash flow margin suggests the company will fail to improve its cash conversion over the next year
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
LKQ is trading at $31.00 per share, or 9.7x forward P/E. Dive into our free research report to see why there are better opportunities than LKQ.
Two Stocks to Watch:
Ross Stores (ROST)
Trailing 12-Month GAAP Operating Margin: 11.9%
Selling excess inventory or overstocked items from other retailers, Ross Stores (NASDAQ: ROST) is an off-price concept that sells apparel and other goods at prices much lower than department stores.
Why Is ROST Interesting?
- Fast expansion of new stores to reach markets with few or no locations is justified by its same-store sales growth
- Comparable store sales rose by 3.4% on average over the past two years, demonstrating its ability to drive increased spending at existing locations
- ROIC punches in at 30.6%, illustrating management’s expertise in identifying profitable investments
Ross Stores’s stock price of $182.11 implies a valuation ratio of 26.2x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free for active Edge members.
Advanced Drainage (WMS)
Trailing 12-Month GAAP Operating Margin: 22.5%
Originally started as a farm water drainage company, Advanced Drainage Systems (NYSE: WMS) provides clean water management solutions to communities across America.
Why Are We Fans of WMS?
- Disciplined cost controls and effective management resulted in a strong long-term operating margin of 21.5%, and it turbocharged its profits by achieving some fixed cost leverage
- Free cash flow margin grew by 11.3 percentage points over the last five years, giving the company more chips to play with
- Market-beating returns on capital illustrate that management has a knack for investing in profitable ventures, and its rising returns show it’s making even more lucrative bets
At $149.74 per share, Advanced Drainage trades at 24.7x forward P/E. Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free for active Edge members .
High-Quality Stocks for All Market Conditions
The market’s up big this year - but there’s a catch. Just 4 stocks account for half the S&P 500’s entire gain. That kind of concentration makes investors nervous, and for good reason. While everyone piles into the same crowded names, smart investors are hunting quality where no one’s looking - and paying a fraction of the price. Check out the high-quality names we’ve flagged in our Top 9 Market-Beating Stocks. 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 Tecnoglass (+1,754% 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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