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".
A business making money today isn’t necessarily a winner, which is why we analyze companies across multiple dimensions at StockStory. Keeping that in mind, here is one profitable company that leverages its financial strength to beat the competition and two best left off your watchlist.
Two Stocks to Sell:
Quanex (NX)
Trailing 12-Month GAAP Operating Margin: 2.8%
Starting in the seamless tube industry, Quanex (NYSE: NX) manufactures building products like window, door, kitchen, and bath cabinet components.
Why Is NX Not Exciting?
- Efficiency has decreased over the last five years as its operating margin fell by 4.6 percentage points
- Performance over the past two years shows its incremental sales were much less profitable, as its earnings per share fell by 6.9% annually
- Free cash flow margin shrank by 6.7 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
Quanex’s stock price of $17.24 implies a valuation ratio of 6.7x forward P/E. Check out our free in-depth research report to learn more about why NX doesn’t pass our bar.
Graco (GGG)
Trailing 12-Month GAAP Operating Margin: 27%
Founded in 1926, Graco (NYSE: GGG) is an industrial company specializing in the development and manufacturing of fluid-handling systems and products.
Why Does GGG Worry Us?
- Sales were flat over the last two years, indicating it’s failed to expand this cycle
- Earnings per share were flat over the last two years and fell short of the peer group average
- Waning returns on capital imply its previous profit engines are losing steam
Graco is trading at $83.27 per share, or 27.5x forward P/E. Read our free research report to see why you should think twice about including GGG in your portfolio.
One Stock to Watch:
Intuit (INTU)
Trailing 12-Month GAAP Operating Margin: 22.2%
Created in 1983 when founder Scott Cook watched his wife struggle to reconcile the family's checkbook, Intuit provides tax and accounting software for small and medium-sized businesses.
Why Could INTU Be a Winner?
- Billings growth has averaged 15% over the last year, indicating a healthy pipeline of new contracts that should drive future revenue increases
- Fast payback periods on sales and marketing expenses allow the company to invest heavily and onboard many customers concurrently
- Robust free cash flow margin of 32.8% gives it many options for capital deployment
At $654.98 per share, Intuit trades at 9.6x forward price-to-sales. Is now the right time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
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 176% over the last five years.
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 Kadant (+351% five-year return). Find your next big winner with StockStory today for free.
