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".
Not all profitable companies are created equal, and that’s why we built StockStory - to help you find the ones that truly shine bright. That said, here are three profitable companies that don’t make the cut and some better opportunities instead.
Simpson (SSD)
Trailing 12-Month GAAP Operating Margin: 19.6%
Aiming to build safer and stronger buildings, Simpson (NYSE: SSD) designs and manufactures structural connectors, anchors, and other construction products.
Why Are We Hesitant About SSD?
- Annual revenue growth of 1.9% over the last two years was below our standards for the industrials sector
- Free cash flow margin dropped by 6.1 percentage points over the last five years, implying the company became more capital intensive as competition picked up
- Waning returns on capital imply its previous profit engines are losing steam
At $156.83 per share, Simpson trades at 19x forward P/E. Check out our free in-depth research report to learn more about why SSD doesn’t pass our bar.
RadNet (RDNT)
Trailing 12-Month GAAP Operating Margin: 3.7%
With over 350 imaging facilities across seven states and a growing artificial intelligence division, RadNet (NASDAQ: RDNT) operates a network of outpatient diagnostic imaging centers across the United States, offering services like MRI, CT scans, PET scans, mammography, and X-rays.
Why Does RDNT Give Us Pause?
- Subscale operations are evident in its revenue base of $1.87 billion, meaning it has fewer distribution channels than its larger rivals
- Free cash flow margin shrank by 3.9 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
- Underwhelming 6.4% return on capital reflects management’s difficulties in finding profitable growth opportunities
RadNet’s stock price of $56.02 implies a valuation ratio of 106.9x forward P/E. Dive into our free research report to see why there are better opportunities than RDNT.
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 Does G Worry Us?
- 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 is trading at $43.59 per share, or 12.1x forward P/E. To fully understand why you should be careful with G, check out our full research report (it’s free).
Stocks We Like More
Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.
While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like our Top 6 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.
