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 is one profitable company that balances growth and profitability and two that may face some trouble.

Two Stocks to Sell:

Hewlett Packard Enterprise (HPE)

Trailing 12-Month GAAP Operating Margin: 1.8%

Born from the 2015 split of the iconic Silicon Valley pioneer Hewlett-Packard, Hewlett Packard Enterprise (NYSE: HPE) provides edge-to-cloud technology solutions that help businesses capture, analyze, and act upon their data across hybrid IT environments.

Why Is HPE Risky?

1. Scale is a double-edged sword because it limits the company’s growth potential compared to its smaller competitors, as reflected in its below-average annual revenue increases of 2.9% for the last five years
2. Performance over the past two years shows its incremental sales were much less profitable, as its earnings per share fell by 5.9% annually
3. Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 6.2 percentage points

At $21.95 per share, Hewlett Packard Enterprise trades at 11.2x forward P/E. If you’re considering HPE for your portfolio, see our FREE research report to learn more.

OneMain (OMF)

Trailing 12-Month GAAP Operating Margin: 19.2%

Dating back to 1912 and formerly known as Springleaf, OneMain Holdings (NYSE: OMF) provides personal loans, auto financing, and credit cards to nonprime consumers who have limited access to traditional banking services.

Why Are We Out on OMF?

1. Sales trends were unexciting over the last five years as its 3.8% annual growth was below the typical financials company
2. Earnings per share were flat over the last two years while its revenue grew, showing its incremental sales were less profitable
3. Elevated debt-to-equity ratio of 6.6× suggests the firm is overleveraged and may struggle to secure additional financing

OneMain is trading at $57.10 per share, or 8.2x forward P/E. Check out our free in-depth research report to learn more about why OMF doesn’t pass our bar.

One Stock to Watch:

Globalstar (GSAT)

Trailing 12-Month GAAP Operating Margin: 3.9%

Known for powering the emergency SOS feature in newer Apple iPhones, Globalstar (NASDAQ: GSAT) operates a network of low-earth orbit satellites that provide voice and data communications services in remote areas where traditional cellular networks don't reach.

Why Do We Like GSAT?

1. Market share has increased this cycle as its 16.3% annual revenue growth over the last two years was exceptional
2. Incremental sales significantly boosted profitability as its annual earnings per share growth of 55.5% over the last two years outstripped its revenue performance
3. Impressive free cash flow profitability enables the company to fund new investments or reward investors with share buybacks/dividends, and its improved cash conversion implies it’s becoming a less capital-intensive business

Globalstar’s stock price of $25.96 implies a valuation ratio of 45.6x forward EV-to-EBITDA. 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

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