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 leverages its financial strength to beat the competition and two that may face some trouble.
Two Stocks to Sell:
Churchill Downs (CHDN)
Trailing 12-Month GAAP Operating Margin: 25.3%
Famous for hosting the Kentucky Derby, Churchill Downs (NASDAQ: CHDN) operates a horse racing, online wagering, and gaming entertainment business in the United States.
Why Is CHDN Not Exciting?
- Lackluster 13.6% annual revenue growth over the last two years indicates the company is losing ground to competitors
- Estimated sales growth of 5.1% for the next 12 months implies demand will slow from its two-year trend
- Underwhelming 8.9% return on capital reflects management’s difficulties in finding profitable growth opportunities
Churchill Downs is trading at $105.08 per share, or 15.4x forward P/E. If you’re considering CHDN for your portfolio, see our FREE research report to learn more.
Nike (NKE)
Trailing 12-Month GAAP Operating Margin: 8%
Originally selling Japanese Onitsuka Tiger sneakers as Blue Ribbon Sports, Nike (NYSE: NKE) is a global titan in athletic footwear, apparel, equipment, and accessories.
Why Is NKE Risky?
- Underwhelming constant currency revenue performance over the past two years suggests its product offering at current prices doesn’t resonate with customers
- Forecasted revenue decline of 1.3% for the upcoming 12 months implies demand will fall even further
- Waning returns on capital imply its previous profit engines are losing steam
Nike’s stock price of $74.21 implies a valuation ratio of 43.5x forward P/E. To fully understand why you should be careful with NKE, check out our full research report (it’s free).
One Stock to Buy:
Trane Technologies (TT)
Trailing 12-Month GAAP Operating Margin: 18.4%
With low-pressure heating systems as its first product, Trane (NYSE: TT) designs, manufactures, and sells HVAC and refrigeration systems, the former to commercial and residential building customers and the latter to commercial truck manufacturers.
Why Is TT a Good Business?
- Impressive 11.1% annual revenue growth over the last two years indicates it’s winning market share this cycle
- Performance over the past two years was turbocharged by share buybacks, which enabled its earnings per share to grow faster than its revenue
- ROIC punches in at 23.8%, illustrating management’s expertise in identifying profitable investments, and its returns are growing as it capitalizes on even better market opportunities
At $429 per share, Trane Technologies trades at 31x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
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 Growth Stocks for this month. 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
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