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 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:
Crown Holdings (CCK)
Trailing 12-Month GAAP Operating Margin: 12.9%
Formerly Crown Cork & Seal, Crown Holdings (NYSE: CCK) produces packaging products for consumer marketing companies, including food, beverage, household, and industrial products.
Why Do We Avoid CCK?
- Constant currency revenue growth has disappointed over the past two years and shows demand was soft
- Demand will likely be soft over the next 12 months as Wall Street’s estimates imply tepid growth of 2%
- Competitive supply chain dynamics and steep production costs are reflected in its low gross margin of 20.3%
Crown Holdings is trading at $100.66 per share, or 14.5x forward P/E. To fully understand why you should be careful with CCK, check out our full research report (it’s free).
Genpact (G)
Trailing 12-Month GAAP Operating Margin: 15%
Originally spun off from General Electric in 2005 to provide business process services, Genpact (NYSE: G) is a global professional services firm that helps businesses transform their operations through digital technology, AI, and data analytics solutions.
Why Are We Cautious About G?
- Estimated sales growth of 3.3% for the next 12 months implies demand will slow from its two-year trend
- Earnings growth over the last two years fell short of the peer group average as its EPS only increased by 9.4% annually
- Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 4 percentage points
Genpact’s stock price of $44.13 implies a valuation ratio of 12.2x forward P/E. Read our free research report to see why you should think twice about including G in your portfolio.
One Stock to Watch:
AppLovin (APP)
Trailing 12-Month GAAP Operating Margin: 42.8%
Co-founded by Adam Foroughi, who was frustrated with not being able to find a good solution to market his own dating app, AppLovin (NASDAQ: APP) is both a mobile game studio and provider of marketing and monetization tools for mobile app developers.
Why Does APP Catch Our Eye?
- Fast payback periods on sales and marketing expenses allow the company to invest heavily and onboard many customers concurrently
- Disciplined cost controls and effective management resulted in a strong trailing 12-month operating margin of 42.8%, and its profits increased over the last year as it scaled
- Strong free cash flow margin of 49.3% enables it to reinvest or return capital consistently
At $383.55 per share, AppLovin trades at 23.2x forward price-to-sales. Is now the time to initiate a position? See for yourself 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 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-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.
