While profitability is essential, it doesn’t guarantee long-term success. Some companies that rest on their margins will lose ground as competition intensifies - as Jeff Bezos said, "Your margin is my opportunity".
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 balance growth and profitability and one that may face some trouble.
One Stock to Sell:
Cars.com (CARS)
Trailing 12-Month GAAP Operating Margin: 6.6%
Originally started as a joint venture between several media companies including The Washington Post and The New York Times, Cars.com (NYSE:CARS) is a digital marketplace that connects new and used car buyers and sellers.
Why Does CARS Worry Us?
- Likely needs to improve its platform or increase its marketing budget for penetration to accelerate as its dealer customers were flat over the last two years
- Estimated sales growth of 1.5% for the next 12 months implies demand will slow from its three-year trend
- Earnings per share lagged its peers over the last three years as they only grew by 1.9% annually
Cars.com’s stock price of $12.87 implies a valuation ratio of 3.8x forward EV/EBITDA. Dive into our free research report to see why there are better opportunities than CARS.
Two Stocks to Watch:
Meta (META)
Trailing 12-Month GAAP Operating Margin: 42.9%
Famously founded by Mark Zuckerberg in his Harvard dorm, Meta Platforms (NASDAQ:META) operates a collection of the largest social networks in the world - Facebook, Instagram, WhatsApp, and Messenger, along with its metaverse focused Reality Labs.
Why Should You Buy META?
- Customers are spending more money on its platform as its average revenue per user has increased by 13.3% annually over the last two years
- Highly efficient business model is illustrated by its impressive 59.9% EBITDA margin, and it turbocharged its profits by achieving some fixed cost leverage
- Impressive free cash flow profitability enables the company to fund new investments or reward investors with share buybacks/dividends
Meta is trading at $704.15 per share, or 16x forward EV/EBITDA. Is now the time to initiate a position? Find out in our full research report, it’s free.
Thermon (THR)
Trailing 12-Month GAAP Operating Margin: 16.4%
Creating the first packaged tracing systems, Thermon (NYSE:THR) is a leading provider of engineered industrial process heating solutions for process industries.
Why Are We Fans of THR?
- Offerings are mission-critical for businesses and lead to a stellar gross margin of 42.8%
- Operating margin expanded by 11.6 percentage points over the last five years as it scaled and became more efficient
- Additional sales over the last five years increased its profitability as the 20.9% annual growth in its earnings per share outpaced its revenue
At $27.70 per share, Thermon trades at 13.6x forward P/E. Is now the right time to buy? See for yourself in our in-depth research report, it’s free.
High-Quality Stocks for All Market Conditions
Donald Trump’s April 2024 "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 9 Market-Beating Stocks. 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-micro-cap company Kadant (+351% 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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