Companies with solid operating margins have a competitive edge, allowing them to reinvest for sustainable expansion. The best of these businesses balance profitability with reinvestment, setting themselves up for long-term success.
Identifying the most compelling profitable companies isn’t always straightforward, and that’s why we started StockStory. That said, here are three profitable companies that balance growth and profitability.
MercadoLibre (MELI)
Trailing 12-Month GAAP Operating Margin: 11.1%
Originally started as an online auction platform, MercadoLibre (NASDAQ: MELI) is a one-stop e-commerce marketplace and fintech platform in Latin America.
Why Will MELI Beat the Market?
- Customer spending is rising as the company has focused on monetization over the last two years, leading to 107% annual growth in its average revenue per user
- Share repurchases over the last three years enabled its annual earnings per share growth of 60.4% to outpace its revenue gains
- Impressive free cash flow profitability enables the company to fund new investments or reward investors with share buybacks/dividends, and its recently improved profitability means it has even more resources to invest or distribute
MercadoLibre is trading at $1,848 per share, or 18.7x forward EV/EBITDA. Is now the time to initiate a position? Find out in our full research report, it’s free.
Blue Bird (BLBD)
Trailing 12-Month GAAP Operating Margin: 11.5%
With around a century of experience, Blue Bird (NASDAQ: BLBD) is a manufacturer of school buses and complementary parts.
Why Are We Bullish on BLBD?
- Impressive 11.9% annual revenue growth over the last five years indicates it’s winning market share this cycle
- Free cash flow margin jumped by 23.5 percentage points over the last five years, giving the company more resources to pursue growth initiatives, repurchase shares, or pay dividends
- Returns on capital are climbing as management makes more lucrative bets
At $62.87 per share, Blue Bird trades at 14.2x forward P/E. Is now the right time to buy? See for yourself in our comprehensive research report, it’s free.
Matador Resources (MTDR)
Trailing 12-Month GAAP Operating Margin: 33.2%
Operating primarily in the Delaware Basin where multiple oil-bearing layers lie stacked thousands of feet deep, Matador Resources (NYSE: MTDR) explores for, drills, and produces oil and natural gas from underground rock formations in New Mexico and Texas.
Why Is MTDR a Good Business?
- Market share has increased this cycle as its 26.4% annual revenue growth over the last ten years was exceptional
- Attractive asset base leads to wonderful unit economics and a best-in-class gross margin of 82.5%
- MTDR is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders
Matador Resources’s stock price of $61.62 implies a valuation ratio of 8.7x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
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