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".
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 leverages its financial strength to beat the competition and two that may struggle to keep up.
Two Stocks to Sell:
RH (RH)
Trailing 12-Month GAAP Operating Margin: 9.9%
Formerly known as Restoration Hardware, RH (NYSE: RH) is a specialty retailer that exclusively sells its own brand of high-end furniture and home decor.
Why Are We Wary of RH?
- Lagging same-store sales over the past two years suggest it might have to change its pricing and marketing strategy to stimulate demand
- Cash-burning history makes us doubt the long-term viability of its business model
- Unfavorable liquidity position could lead to additional equity financing that dilutes shareholders
At $190 per share, RH trades at 16.7x forward P/E. If you’re considering RH for your portfolio, see our FREE research report to learn more.
Flowserve (FLS)
Trailing 12-Month GAAP Operating Margin: 10.4%
Manufacturing the largest pump ever built for nuclear power generation, Flowserve (NYSE: FLS) manufactures and sells flow control equipment for various industries.
Why Does FLS Give Us Pause?
- Backlog growth averaged a weak 3.6% over the past two years, suggesting it may need to tweak its product roadmap or go-to-market strategy
- Earnings growth over the last five years fell short of the peer group average as its EPS only increased by 5.9% annually
- Low free cash flow margin of 4.2% for the last five years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
Flowserve is trading at $46.43 per share, or 14.4x forward P/E. Read our free research report to see why you should think twice about including FLS in your portfolio.
One Stock to Watch:
Huron (HURN)
Trailing 12-Month GAAP Operating Margin: 11.6%
Founded in 2002 during a time of significant regulatory change in corporate America, Huron Consulting Group (NASDAQ: HURN) is a professional services company that helps organizations develop growth strategies, optimize operations, and implement digital transformation solutions.
Why Are We Positive On HURN?
- Annual revenue growth of 13.1% over the last two years was superb and indicates its market share increased during this cycle
- Adjusted operating margin expanded by 8.6 percentage points over the last five years as it scaled and became more efficient
- Share repurchases over the last two years enabled its annual earnings per share growth of 34.6% to outpace its revenue gains
Huron’s stock price of $133.87 implies a valuation ratio of 18.2x forward P/E. Is now a good time to buy? See for yourself in our comprehensive research report, it’s free.
High-Quality Stocks for All Market Conditions
Market indices reached historic highs following Donald Trump’s presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth.
While this has caused many investors to adopt a "fearful" wait-and-see approach, we’re leaning into our best ideas that can grow regardless of the political or macroeconomic climate. Take advantage of Mr. Market by checking out our Top 5 Growth Stocks for this month. 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 Exlservice (+354% 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
