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. That said, here are two profitable companies that balance growth and profitability and one that may face some trouble.
One Stock to Sell:
Knight-Swift Transportation (KNX)
Trailing 12-Month GAAP Operating Margin: 3.9%
Covering 1.6 billion loaded miles in 2023 alone, Knight-Swift Transportation (NYSE: KNX) offers less-than-truckload and full truckload delivery services.
Why Should You Sell KNX?
- Sales trends were unexciting over the last two years as its 1.2% annual growth was below the typical industrials company
- Free cash flow margin shrank by 9.5 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
Knight-Swift Transportation’s stock price of $39.17 implies a valuation ratio of 20x forward price-to-earnings. Dive into our free research report to see why there are better opportunities than KNX.
Two Stocks to Buy:
Inter Parfums (IPAR)
Trailing 12-Month GAAP Operating Margin: 18.9%
With licenses to produce colognes and perfumes under brands such as Kate Spade, Van Cleef & Arpels, and Abercrombie & Fitch, Inter Parfums (NASDAQ: IPAR) manufactures and distributes fragrances worldwide.
Why Should You Buy IPAR?
- Remarkable 18.2% revenue growth over the last three years demonstrates its ability to capture significant market share
- Unique products and pricing power lead to a top-tier gross margin of 58.7%
- Free cash flow margin grew by 5.1 percentage points over the last year, giving the company more chips to play with
Inter Parfums is trading at $108.75 per share, or 20.4x forward price-to-earnings. Is now the time to initiate a position? See for yourself in our in-depth research report, it’s free.
HEICO (HEI)
Trailing 12-Month GAAP Operating Margin: 21.8%
Founded in 1957, HEICO (NYSE: HEI) manufactures and services aerospace and electronic components for commercial aviation, defense, space, and other industries.
Why Is HEI a Top Pick?
- Existing business lines can expand without risky acquisitions as its organic revenue growth averaged 9.6% over the past two years
- Earnings growth has massively outpaced its peers over the last two years as its EPS has compounded at 24.9% annually
- Strong free cash flow margin of 17.8% enables it to reinvest or return capital consistently
At $251.21 per share, HEICO trades at 56.6x forward price-to-earnings. Is now the right time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
Market indices reached historic highs following Donald Trump’s presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth.
While this has caused many investors to adopt a "fearful" wait-and-see approach, we’re leaning into our best ideas that can grow regardless of the political or macroeconomic climate. Take advantage of Mr. Market by checking out 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 175% over the last five years.
Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Comfort Systems (+751% five-year return). Find your next big winner with StockStory today for free.
