Not all profitable companies are built to last - some rely on outdated models or unsustainable advantages.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 leverages its financial strength to beat the competition and two that may struggle to keep up.
Two Stocks to Sell:
United Parcel Service (UPS)
Trailing 12-Month GAAP Operating Margin: 9.3%
Trademarking its recognizable UPS Brown color, UPS (NYSE: UPS) offers package delivery, supply chain management, and freight forwarding services.
Why Do We Pass on UPS?
- Declining unit sales over the past two years imply it may need to invest in improvements to get back on track
- Performance over the past two years shows each sale was less profitable as its earnings per share dropped by 18.4% annually, worse than its revenue
- Waning returns on capital imply its previous profit engines are losing steam
United Parcel Service is trading at $86.90 per share, or 11.8x forward P/E. If you’re considering UPS for your portfolio, see our FREE research report to learn more.
Henry Schein (HSIC)
Trailing 12-Month GAAP Operating Margin: 5%
With a vast inventory of over 300,000 products stocked in distribution centers spanning more than 5.3 million square feet worldwide, Henry Schein (NASDAQ: HSIC) is a global distributor of healthcare products and services primarily to dental practices, medical offices, and other healthcare facilities.
Why Is HSIC Not Exciting?
- Organic revenue growth fell short of our benchmarks over the past two years and implies it may need to improve its products, pricing, or go-to-market strategy
- Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 3.6 percentage points
- Diminishing returns on capital suggest its earlier profit pools are drying up
Henry Schein’s stock price of $67.86 implies a valuation ratio of 13.3x forward P/E. Read our free research report to see why you should think twice about including HSIC in your portfolio.
One Stock to Watch:
Federated Hermes (FHI)
Trailing 12-Month GAAP Operating Margin: 28%
With roots dating back to 1955 and a pioneering role in money market funds, Federated Hermes (NYSE: FHI) is an investment management firm that offers a wide range of funds and strategies for institutional and individual investors.
Why Are We Positive On FHI?
- Share repurchases over the last two years enabled its annual earnings per share growth of 20.6% to outpace its revenue gains
- Stellar return on equity showcases management’s ability to surface highly profitable business ventures
At $51.74 per share, Federated Hermes trades at 11.3x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free for active Edge members.
High-Quality Stocks for All Market Conditions
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