1 Profitable Stock to Research Further and 2 Facing Challenges

August 06, 2025 at 00:32 AM EDT

HEES Cover Image

Not all profitable companies are built to last - some rely on outdated models or unsustainable advantages.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.

A business making money today isn’t necessarily a winner, which is why we analyze companies across multiple dimensions at StockStory. That said, here is one profitable company that balances growth and profitability and two best left off your watchlist.

Two Stocks to Sell:

H&E Equipment Services (HEES)

Trailing 12-Month GAAP Operating Margin: 12.3%

Founded after recognizing a growth trend along the Mississippi River and opportunities developing in the earthmoving and construction equipment business, H&E (NASDAQ: HEES) offers machinery for companies to purchase or rent.

Why Should You Dump HEES?

Annual revenue growth of 2.1% over the last five years was below our standards for the industrials sector
Earnings per share fell by 1.3% annually over the last five years while its revenue grew, partly because it diluted shareholders
Poor free cash flow margin of 0.5% for the last five years limits its freedom to invest in growth initiatives, execute share buybacks, or pay dividends

H&E Equipment Services is trading at $94.50 per share, or 6.3x forward EV-to-EBITDA. Read our free research report to see why you should think twice about including HEES in your portfolio.

Radian Group (RDN)

Trailing 12-Month GAAP Operating Margin: 58.2%

Founded during the housing boom of 1977 and weathering multiple real estate cycles since, Radian Group (NYSE: RDN) provides mortgage insurance and real estate services, helping lenders manage risk and homebuyers achieve affordable homeownership.

Why Do We Think Twice About RDN?

Customers purchased fewer policies this cycle as its net premiums earned declined by 3% annually over the last five years
Operational productivity has decreased over the last two years as its combined ratio worsened by 23.4 percentage points
Incremental sales over the last two years were much less profitable as its earnings per share fell by 1.5% annually while its revenue grew

Radian Group’s stock price of $33.26 implies a valuation ratio of 1x forward P/B. Check out our free in-depth research report to learn more about why RDN doesn’t pass our bar.

One Stock to Watch:

ITT (ITT)

Trailing 12-Month GAAP Operating Margin: 18.8%

Playing a crucial role in the development of the first transatlantic television transmission in 1956, ITT (NYSE: ITT) provides motion and fluid handling equipment for various industries

Why Are We Positive On ITT?

Healthy operating margin of 16.4% shows it’s a well-run company with efficient processes, and its operating leverage amplified its profits over the last five years
Free cash flow margin jumped by 15.5 percentage points over the last five years, giving the company more resources to pursue growth initiatives, repurchase shares, or pay dividends
Market-beating returns on capital illustrate that management has a knack for investing in profitable ventures

At $166.17 per share, ITT trades at 24.5x forward P/E. Is now the time to initiate a position? See for yourself in our full research report, it’s free.

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