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. Keeping that in mind, here are two profitable companies that balance growth and profitability and one best left off your watchlist.
One Stock to Sell:
Cisco (CSCO)
Trailing 12-Month GAAP Operating Margin: 19%
Founded in 1984 by a husband and wife team who wanted computers at Stanford to talk to computers at UC Berkeley, Cisco (NASDAQ:CSCO) designs and sells networking equipment, security solutions, and collaboration tools that help businesses connect their systems and secure their digital operations.
Why Do We Steer Clear of CSCO?
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Sales were flat over the last two years, indicating it’s failed to expand this cycle
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Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 6.3 percentage points
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Eroding returns on capital suggest its historical profit centers are aging
Cisco’s stock price of $59.26 implies a valuation ratio of 15.7x forward P/E. Check out our free in-depth research report to learn more about why CSCO doesn’t pass our bar .
Two Stocks to Buy:
Vital Farms (VITL)
Trailing 12-Month GAAP Operating Margin: 10.5%
With an emphasis on ethically produced products, Vital Farms (NASDAQ:VITL) specializes in pasture-raised eggs and butter.
Why Are We Backing VITL?
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Stellar 18.9% growth in unit sales over the past two years demonstrates the high demand for its products
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Revenue outlook for the upcoming 12 months is outstanding and shows it’s on track to gain market share
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Earnings per share have massively outperformed its peers over the last three years, increasing by 193% annually
At $36.05 per share, Vital Farms trades at 29.6x forward P/E. Is now the time to initiate a position? See for yourself in our full research report, it’s free .
Pure Storage (PSTG)
Trailing 12-Month GAAP Operating Margin: 2.7%
Founded in 2009 as a pioneer in enterprise all-flash storage technology, Pure Storage (NYSE:PSTG) provides all-flash data storage hardware and software that helps organizations manage their data more efficiently across on-premises and cloud environments.
Why Will PSTG Outperform?
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ARR trends over the past two years show it’s maintaining a steady flow of long-term contracts that contribute positively to its revenue predictability
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Performance over the past five years shows its incremental sales were extremely profitable, as its annual earnings per share growth of 46.4% outpaced its revenue gains
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Robust free cash flow margin of 16% gives it many options for capital deployment, and its recently improved profitability means it has even more resources to invest or distribute
Pure Storage is trading at $47.98 per share, or 27.1x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free .
Stocks That Overcame Trump’s 2018 Tariffs
Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.
While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like 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 175% over the last five years.
Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like United Rentals (+322% five-year return). Find your next big winner with StockStory today for free .