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 are two profitable companies that leverage their financial strength to beat the competition and one best left off your watchlist.
One Stock to Sell:
Addus HomeCare (ADUS)
Trailing 12-Month GAAP Operating Margin: 10%
Serving approximately 66,000 clients across 22 states with a focus on "dual eligible" Medicare and Medicaid beneficiaries, Addus HomeCare (NASDAQ: ADUS) provides in-home personal care, hospice, and home health services to elderly, chronically ill, and disabled individuals.
Why Do We Think Twice About ADUS?
- Smaller revenue base of $1.48 billion means it hasn’t achieved the economies of scale that some industry juggernauts enjoy
- Free cash flow margin has stayed in place over the last five years
- Stagnant returns on capital show management has failed to improve the company’s business quality
Addus HomeCare’s stock price of $118.51 implies a valuation ratio of 16.5x forward P/E. Read our free research report to see why you should think twice about including ADUS in your portfolio.
Two Stocks to Watch:
Western Digital (WDC)
Trailing 12-Month GAAP Operating Margin: 34.5%
Founded in 1970 by a Motorola employee, Western Digital (NASDAQ: WDC) is a leading producer of hard disk drives, SSDs and flash memory.
Why Does WDC Stand Out?
- Sales outlook for the upcoming 12 months calls for 48.3% growth, an acceleration from its two-year trend
- Efficiency rose over the last five years as its Operating margin increased by 21.7 percentage points
- Free cash flow margin expanded by 23.1 percentage points over the last five years, providing additional flexibility for investments and share buybacks/dividends
Western Digital is trading at $458.26 per share, or 23.8x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
Allison Transmission (ALSN)
Trailing 12-Month GAAP Operating Margin: 19.6%
Helping build race cars at one point, Allison Transmission (NYSE: ALSN) offers transmissions to original equipment manufacturers and fleet operators.
Why Is ALSN a Top Pick?
- Impressive 18.9% annual revenue growth over the last two years indicates it’s winning market share this cycle
- Share repurchases have amplified shareholder returns as its annual earnings per share growth of 17.7% exceeded its revenue gains over the last five years
- Strong free cash flow margin of 19.2% enables it to reinvest or return capital consistently
At $127.56 per share, Allison Transmission trades at 11.7x forward P/E. Is now a good time to buy? See for yourself in our in-depth research report, it’s free.
Stocks We Like Even More
ONE MORE THING: Top 5 Growth Stocks. The biggest stock winners almost always had one thing in common before they ran. Revenue growing like crazy. Meta. CrowdStrike. Broadcom. Our AI flagged all three. They returned 315%, 314%, and 455%, respectively.
Find out which 5 stocks it’s flagging this month — FREE. Get Our Top 5 Growth Stocks for Free HERE.
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.
