1 Profitable Stock with Competitive Advantages and 2 to Think Twice About
A company with profits isn't always a great investment. Some struggle to maintain growth, face looming threats, or fail to reinvest wisely, limiting their future potential.
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 generates reliable profits without sacrificing growth and two best left off your watchlist.
Trailing 12-Month GAAP Operating Margin: 13.8%
Contributing components and materials to the famous Manhattan Project in the 1940s, BWX (NYSE:BWXT) is a manufacturer and service provider of nuclear components and fuel for government and commercial industries.
Why Are We Wary of BWXT?
6.6% annual revenue growth over the last five years was slower than its industrials peers
Efficiency has decreased over the last five years as its operating margin fell by 2.4 percentage points
Earnings growth underperformed the sector average over the last five years as its EPS grew by just 3.8% annually
BWX is trading at $107.41 per share, or 29.9x forward P/E. Dive into our free research report to see why there are better opportunities than BWXT.
Trailing 12-Month GAAP Operating Margin: 11%
The first homebuilder to be listed on the NYSE, KB Home (NYSE:KB) is a homebuilding company targeting the first-time home buyer and move-up buyer markets.
Why Are We Out on KBH?
Sales pipeline suggests its future revenue growth won't meet our standards as its backlog averaged 22.9% declines over the past two years
Earnings per share have contracted by 5.5% annually over the last two years, a headwind for returns as stock prices often echo long-term EPS performance
Free cash flow margin shrank by 5.5 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
At $53.20 per share, KB Home trades at 6.6x forward P/E. Read our free research report to see why you should think twice about including KBH in your portfolio, it's free.
Trailing 12-Month GAAP Operating Margin: 30.9%
Founded in 1980 by David Lam, the man who pioneered semiconductor etching technology, Lam Research (NASDAQ:LRCX) is one of the leading providers of wafer fabrication equipment used to make semiconductors.
Why Are We Fans of LRCX?
Disciplined cost controls and effective management resulted in a strong two-year operating margin of 29.6%, and it turbocharged its profits by achieving some fixed cost leverage
Impressive free cash flow profitability enables the company to fund new investments or reward investors with share buybacks/dividends, and its growing cash flow gives it even more resources to deploy
Market-beating returns on capital illustrate that management has a knack for investing in profitable ventures
Lam Research's stock price of $75.17 implies a valuation ratio of 19.9x forward P/E. Is now a good time to buy? See for yourself in our comprehensive research report, it's free.
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 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.
Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Sterling Infrastructure (+1,096% five-year return). Find your next big winner with StockStory today for free.
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