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 leverages its financial strength to beat the competition and two best left off your watchlist.
Two Stocks to Sell:
Cable One (CABO)
Trailing 12-Month GAAP Operating Margin: 26.8%
Founded in 1986, Cable One (NYSE: CABO) provides high-speed internet, cable television, and telephone services, primarily in smaller markets across the United States.
Why Does CABO Fall Short?
- Demand for its offerings was relatively low as its number of residential data subscribers has underwhelmed
- Sales are expected to decline once again over the next 12 months as it continues working through a challenging demand environment
- Underwhelming 9.2% return on capital reflects management’s difficulties in finding profitable growth opportunities, and its decreasing returns suggest its historical profit centers are aging
Cable One’s stock price of $131.33 implies a valuation ratio of 0.9x forward EV-to-EBITDA. If you’re considering CABO for your portfolio, see our FREE research report to learn more.
Regeneron (REGN)
Trailing 12-Month GAAP Operating Margin: 27.2%
Founded by scientists who wanted to build a company where science could thrive, Regeneron Pharmaceuticals (NASDAQ: REGN) develops and commercializes medicines for serious diseases, with key products treating eye conditions, allergic diseases, cancer, and other disorders.
Why Do We Think Twice About REGN?
- Scale is a double-edged sword because it limits the company’s growth potential compared to its smaller competitors, as reflected in its below-average annual revenue increases of 6.7% for the last two years
- Day-to-day expenses have swelled relative to revenue over the last five years as its adjusted operating margin fell by 12.3 percentage points
- Waning returns on capital imply its previous profit engines are losing steam
At $520 per share, Regeneron trades at 13x forward P/E. Read our free research report to see why you should think twice about including REGN in your portfolio.
One Stock to Watch:
DXP (DXPE)
Trailing 12-Month GAAP Operating Margin: 8.5%
Founded during the emergence of Big Oil in Texas, DXP (NASDAQ: DXPE) provides pumps, valves, and other industrial components.
Why Does DXPE Stand Out?
- Operating profits increased over the last five years as the company gained some leverage on its fixed costs and became more efficient
- Performance over the past two years was turbocharged by share buybacks, which enabled its earnings per share to grow faster than its revenue
- Improving returns on capital reflect management’s ability to monetize investments
DXP is trading at $83.30 per share, or 15.1x forward P/E. Is now the right time to buy? See for yourself in our comprehensive research report, it’s free.
Stocks We Like Even More
The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.
While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio by checking out our Top 6 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 Kadant (+351% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today
