Not all profitable companies are built to last - some rely on outdated models or unsustainable advantages. Just because a business is in the green today doesn’t mean it will thrive tomorrow.
Profits are valuable, but they’re not everything. At StockStory, we help you identify the companies that have real staying power. That said, here is one profitable company that balances growth and profitability and two that may face some trouble.
Two Stocks to Sell:
La-Z-Boy (LZB)
Trailing 12-Month GAAP Operating Margin: 6%
The prized possession of every mancave, La-Z-Boy (NYSE: LZB) is a furniture company specializing in recliners, sofas, and seats.
Why Do We Steer Clear of LZB?
- Products and services aren't resonating with the market as its revenue declined by 2.8% annually over the last two years
- Estimated sales growth of 1.9% for the next 12 months is soft and implies weaker demand
- Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability
La-Z-Boy’s stock price of $35.41 implies a valuation ratio of 11.1x forward P/E. If you’re considering LZB for your portfolio, see our FREE research report to learn more.
Prudential (PRU)
Trailing 12-Month GAAP Operating Margin: 3.5%
Recognized by its iconic Rock of Gibraltar logo symbolizing strength and stability since 1896, Prudential Financial (NYSE: PRU) provides life insurance, annuities, retirement solutions, investment management, and other financial services to individual and institutional customers globally.
Why Do We Pass on PRU?
- Insurance policy sales contracted this cycle as net premiums earned decreased by 2.3% annually over the last five years
- Products and services are facing significant credit quality challenges during this cycle as book value per share has declined by 12.2% annually over the last five years
- High debt-to-equity ratio of 1.3× shows the firm carries too much debt relative to shareholder equity, increasing bankruptcy risk
At $107.50 per share, Prudential trades at 1.2x forward P/B. To fully understand why you should be careful with PRU, check out our full research report (it’s free).
One Stock to Buy:
Instacart (CART)
Trailing 12-Month GAAP Operating Margin: 14.8%
Powering more than one billion grocery orders since its founding, Instacart (NASDAQ: CART) is an online grocery shopping and delivery platform that partners with retailers to help customers shop from local stores through its app or website.
Why Is CART a Good Business?
- Annual revenue growth of 19.5% over the last three years was superb and indicates its market share is rising
- Incremental sales significantly boosted profitability as its annual earnings per share growth of 40.3% over the last three years outstripped its revenue performance
- Free cash flow margin grew by 23.9 percentage points over the last few years, giving the company more chips to play with
Instacart is trading at $44 per share, or 11.3x forward EV/EBITDA. Is now a good time to buy? See for yourself in our in-depth research report, it’s free.
Stocks We Like Even More
Donald Trump’s April 2025 "Liberation Day" tariffs sent markets into a tailspin, but stocks have since rebounded strongly, proving that knee-jerk reactions often create the best buying opportunities.
The smart money is already positioning for the next leg up. Don’t miss out on the recovery - check out our 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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