Not all profitable companies are built to last - some rely on outdated models or unsustainable advantages.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.
Not all profitable companies are created equal, and that’s why we built StockStory - to help you find the ones that truly shine bright. That said, here are two profitable companies that generate reliable profits without sacrificing growth and one that may face some trouble.
One Stock to Sell:
Entegris (ENTG)
Trailing 12-Month GAAP Operating Margin: 16.6%
With fabs representing the company’s largest customer type, Entegris (NASDAQ:ENTG) supplies products that purify, protect, and generally ensure the integrity of raw materials needed for advanced semiconductor manufacturing.
Why Do We Pass on ENTG?
- Sales tumbled by 4.5% annually over the last two years, showing market trends are working against its favor during this cycle
- Sales are projected to be flat over the next 12 months and imply weak demand
- 8.9 percentage point decline in its free cash flow margin over the last five years reflects the company’s increased investments to defend its market position
At $78.74 per share, Entegris trades at 22.3x forward P/E. Read our free research report to see why you should think twice about including ENTG in your portfolio.
Two Stocks to Watch:
Meta (META)
Trailing 12-Month GAAP Operating Margin: 42.9%
Famously founded by Mark Zuckerberg in his Harvard dorm, Meta Platforms (NASDAQ:META) operates a collection of the largest social networks in the world - Facebook, Instagram, WhatsApp, and Messenger, along with its metaverse focused Reality Labs.
Why Are We Bullish on META?
- Customer spending is rising as the company has focused on monetization over the last two years, leading to 13.3% annual growth in its average revenue per user
- Excellent EBITDA margin of 59.9% highlights the efficiency of its business model, and it turbocharged its profits by achieving some fixed cost leverage
- META is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders
Meta is trading at $628.25 per share, or 14.5x forward EV/EBITDA. Is now a good time to buy? See for yourself in our comprehensive research report, it’s free.
Grand Canyon Education (LOPE)
Trailing 12-Month GAAP Operating Margin: 26.6%
Founded in 1949, Grand Canyon Education (NASDAQ:LOPE) is an educational services provider known for its operation at Grand Canyon University.
Why Could LOPE Be a Winner?
- Healthy operating margin of 26.5% shows it’s a well-run company with efficient processes
- Market-beating returns on capital illustrate that management has a knack for investing in profitable ventures, and its rising returns show it’s making even more lucrative bets
- Returns on capital are growing as management capitalizes on its market opportunities
Grand Canyon Education’s stock price of $197.77 implies a valuation ratio of 22.1x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
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.
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