Even if a company is profitable, it doesn’t always mean it’s a great investment. Some struggle to maintain growth, face looming threats, or fail to reinvest wisely, limiting their future potential.
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 are two profitable companies that generate reliable profits without sacrificing growth and one that may struggle to keep up.
One Stock to Sell:
Donnelley Financial Solutions (DFIN)
Trailing 12-Month GAAP Operating Margin: 17.6%
Born from the need to navigate increasingly complex financial regulations in the digital age, Donnelley Financial Solutions (NYSE: DFIN) provides software and technology-enabled services that help companies comply with SEC regulations and manage financial transactions and reporting requirements.
Why Is DFIN Not Exciting?
- Annual sales declines of 2.5% for the past five years show its products and services struggled to connect with the market during this cycle
- Earnings per share lagged its peers over the last two years as they only grew by 4.3% annually
Donnelley Financial Solutions’s stock price of $54.67 implies a valuation ratio of 1.9x forward price-to-sales. If you’re considering DFIN for your portfolio, see our FREE research report to learn more.
Two Stocks to Watch:
ESCO (ESE)
Trailing 12-Month GAAP Operating Margin: 15.3%
A developer of the communication systems used in the Batmobile of “The Dark Knight,” ESCO (NYSE: ESE) is a provider of engineered components for the aerospace, defense, and utility sectors.
Why Will ESE Beat the Market?
- Exciting sales outlook for the upcoming 12 months calls for 23.1% growth, an acceleration from its two-year trend
- Superior product capabilities and pricing power result in a premier gross margin of 39.1%
- Additional sales over the last two years increased its profitability as the 22.4% annual growth in its earnings per share outpaced its revenue
At $208.28 per share, ESCO trades at 31.6x forward P/E. Is now a good time to buy? See for yourself in our in-depth research report, it’s free.
Medpace (MEDP)
Trailing 12-Month GAAP Operating Margin: 21.4%
Founded in 1992 as a scientifically-driven alternative to traditional contract research organizations, Medpace (NASDAQ: MEDP) provides outsourced clinical trial management and research services to help pharmaceutical, biotechnology, and medical device companies develop new treatments.
Why Is MEDP on Our Radar?
- Core business can prosper without any help from acquisitions as its organic revenue growth averaged 15.7% over the past two years
- Share buybacks catapulted its annual earnings per share growth to 36.7%, which outperformed its revenue gains over the last five years
- Stellar returns on capital showcase management’s ability to surface highly profitable business ventures
Medpace is trading at $489.47 per share, or 40x 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
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