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".
Not all profitable companies are created equal, and that’s why we built StockStory - to help you find the ones that truly shine bright. Keeping that in mind, here is one profitable company that balances growth and profitability and two that may struggle to keep up.
Two Stocks to Sell:
Analog Devices (ADI)
Trailing 12-Month GAAP Operating Margin: 22.7%
Founded by two MIT graduates, Ray Stata and Matthew Lorber in 1965, Analog Devices (NASDAQ: ADI) is one of the largest providers of high performance analog integrated circuits used mainly in industrial end markets, along with communications, autos, and consumer devices.
Why Is ADI Not Exciting?
- Sales tumbled by 12.7% annually over the last two years, showing market trends are working against its favor during this cycle
- Expenses have increased as a percentage of revenue over the last five years as its operating margin fell by 7.3 percentage points
- ROIC of 6.4% reflects management’s challenges in identifying attractive investment opportunities, and its shrinking returns suggest its past profit sources are losing steam
Analog Devices’s stock price of $218 implies a valuation ratio of 27.8x forward P/E. Read our free research report to see why you should think twice about including ADI in your portfolio.
Teradata (TDC)
Trailing 12-Month GAAP Operating Margin: 13.3%
Part of point-of-sale and ATM company NCR from 1991 to 2007, Teradata (NYSE: TDC) offers a software-as-service platform that helps organizations manage and analyze their data across multiple storages.
Why Do We Pass on TDC?
- Billings have dropped by 3.4% over the last year, suggesting it might have to lower prices to stimulate growth
- Forecasted revenue decline of 3.3% for the upcoming 12 months implies demand will fall even further
- High servicing costs result in a relatively inferior gross margin of 60.2% that must be offset through increased usage
Teradata is trading at $22.33 per share, or 1.3x forward price-to-sales. Check out our free in-depth research report to learn more about why TDC doesn’t pass our bar.
One Stock to Watch:
Cal-Maine (CALM)
Trailing 12-Month GAAP Operating Margin: 32.5%
Known for brands such as Egg-Land’s Best and Land O’ Lakes, Cal-Maine (NASDAQ: CALM) produces, packages, and distributes eggs.
Why Are We Positive On CALM?
- Annual revenue growth of 35.3% over the last three years was superb and indicates its market share is rising
- Incremental sales over the last three years have been highly profitable as its earnings per share increased by 280% annually, topping its revenue gains
- Strong free cash flow margin of 17.9% enables it to reinvest or return capital consistently, and its improved cash conversion implies it’s becoming a less capital-intensive business
At $96.75 per share, Cal-Maine trades at 9.1x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
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 Strong Momentum Stocks for this week. 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 Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today for free.
