Not all profitable companies are built to last - some rely on outdated models or unsustainable advantages.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 balances growth and profitability and two best left off your watchlist.
Two stocks to sell:
Huntington Ingalls (HII)
Trailing 12-month GAAP operating margin: 5.8%
Building Nimitz-class aircraft carriers used in active service, Huntington Ingalls (NYSE: HII) develops marine vessels and their mission systems and maintenance services.
Why Do We Pass on HII?
- Annual sales growth of 7.1% over the last five years lagged behind its industrials peers as its large revenue base made it difficult to generate incremental demand
- Earnings growth underperformed the sector average over the last five years as its EPS grew by just 2.2% annually
- Underwhelming 7.6% return on capital reflects management’s difficulties in finding profitable growth opportunities
Huntington Ingalls’s stock price of $316.50 implies a valuation ratio of 13.7x forward P/E. To fully understand why you should be careful with HII, check out our full research report (it’s free).
Align Technology (ALGN)
Trailing 12-month GAAP operating margin: 14.9%
Pioneering an alternative to traditional metal braces with nearly invisible plastic aligners, Align Technology (NASDAQ: ALGN) designs and manufactures Invisalign clear aligners, iTero intraoral scanners, and dental CAD/CAM software for orthodontic and restorative treatments.
Why Does ALGN Fall Short?
- Sales trends were unexciting over the last five years as its 2.1% annual growth was below the typical healthcare company
- Earnings per share were flat over the last five years and fell short of the peer group average
- Diminishing returns on capital suggest its earlier profit pools are drying up
Align Technology is trading at $151.00 per share, or 12.9x forward P/E. Check out our free in-depth research report to learn more about why ALGN doesn’t pass our bar.
One stock to watch:
Match Group (MTCH)
Trailing 12-month GAAP operating margin: 28.2%
Originally started as a dial-up service before widespread internet adoption, Match (NASDAQ: MTCH) was an early innovator in online dating and today has a portfolio of apps including Tinder, Hinge, Archer, and OkCupid.
Why Are We Positive on MTCH?
- Brand power and efficient targeting help keep customer acquisition costs in check while growing its user base
- Disciplined cost controls and effective management resulted in a strong two-year EBITDA margin of 37%, and its rise over the last few years was fueled by some leverage on its fixed costs
- Robust free cash flow margin of 29.4% gives it many options for capital deployment, and its rising cash conversion increases its margin of safety
At $43.06 per share, Match Group trades at 9.5x forward EV/EBITDA. Is now the right time to buy? See for yourself in our comprehensive research report, it’s free.
Stocks we like even more
WHILE YOU’RE HERE: Top 9 Market-Beating Stocks. The best stocks don’t just beat the market once. They do it again. And again. Robust revenue growth, rising free cash flow, returns on capital that leave their competition in the dust. The market has already rewarded these businesses.
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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+214% between June 2020 and June 2025). Find your next big winner with StockStory today.
