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. Keeping that in mind, here is one profitable company that balances growth and profitability and two that may face some trouble.
Two Stocks to Sell:
Coty (COTY)
Trailing 12-Month GAAP Operating Margin: 4.3%
With a portfolio boasting many household brands, Coty (NYSE: COTY) is a beauty products powerhouse spanning cosmetics, fragrances, and skincare.
Why Is COTY Risky?
- Core business is underperforming as its organic revenue has disappointed over the past two years, suggesting it might need acquisitions to stimulate growth
- Projected sales decline of 2.5% for the next 12 months points to a tough demand environment ahead
- Low returns on capital reflect management’s struggle to allocate funds effectively
Coty’s stock price of $4.92 implies a valuation ratio of 8.9x forward P/E. Dive into our free research report to see why there are better opportunities than COTY.
Brink's (BCO)
Trailing 12-Month GAAP Operating Margin: 11.4%
Known for its iconic armored trucks that have been a fixture in American cities since 1859, Brink's (NYSE: BCO) provides secure transportation and management of cash and valuables for banks, retailers, and other businesses worldwide.
Why Is BCO Not Exciting?
- Annual revenue growth of 4% over the last two years was below our standards for the business services sector
- Free cash flow margin shrank by 3.4 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
- Low returns on capital reflect management’s struggle to allocate funds effectively
Brink's is trading at $93.40 per share, or 12.5x forward P/E. To fully understand why you should be careful with BCO, check out our full research report (it’s free).
One Stock to Buy:
Energy Recovery (ERII)
Trailing 12-Month GAAP Operating Margin: 15%
Having saved far more than a trillion gallons of water, Energy Recovery (NASDAQ: ERII) provides energy recovery devices to the water treatment, oil and gas, and chemical processing sectors.
Why Should You Buy ERII?
- Offerings are difficult to replicate at scale and result in a best-in-class gross margin of 69.4%
- Earnings per share grew by 71.9% annually over the last two years and trumped its peers
- ROIC punches in at 22.5%, illustrating management’s expertise in identifying profitable investments
At $13.50 per share, Energy Recovery trades at 16.6x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
When Trump unveiled his aggressive tariff plan in April 2024, markets tanked as investors feared a full-blown trade war. But those who panicked and sold missed the subsequent rebound that’s already erased most losses.
Don’t let fear keep you from great opportunities and take a look at 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-small-cap company Comfort Systems (+782% 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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