1 Profitable Stock with Exciting Potential and 2 to Ignore
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.
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 balances growth and profitability and two best left off your watchlist.
Trailing 12-Month GAAP Operating Margin: 10.8%
Best known for its Grown in Idaho brand, Lamb Weston (NYSE:LW) produces and distributes potato products such as frozen french fries and mashed potatoes.
Why Are We Hesitant About LW?
Projected sales are flat for the next 12 months, implying demand will slow from its three-year trend
Day-to-day expenses have swelled relative to revenue over the last year as its operating margin fell by 5 percentage points
Poor free cash flow margin for the last two years limits its freedom to invest in growth initiatives, execute share buybacks, or pay dividends
Lamb Weston's stock price of $51.94 implies a valuation ratio of 15.1x forward price-to-earnings. To fully understand why you should be careful with LW, check out our full research report (it's free).
Trailing 12-Month GAAP Operating Margin: 5.2%
With a higher focus on style and aesthetics compared to other large general merchandise retailers, Target (NYSE:TGT) serves the suburban consumer who is looking for a wide range of products under one roof.
Why Are We Wary of TGT?
Lagging same-store sales over the past two years suggest it might have to change its pricing and marketing strategy to stimulate demand
Gross margin of 28% is an output of its commoditized inventory
Responsiveness to unforeseen market trends is restricted due to its substandard operating profitability
At $96.57 per share, Target trades at 10.4x forward price-to-earnings. Dive into our free research report to see why there are better opportunities than TGT.
Trailing 12-Month GAAP Operating Margin: 62.4%
Founded in 1993 by Jensen Huang and two former Sun Microsystems engineers, Nvidia (NASDAQ:NVDA) is a leading fabless designer of chips used in gaming, PCs, data centers, automotive, and a variety of end markets.
Why Are We Backing NVDA?
Annual revenue growth of 120% over the last two years was superb and indicates its market share increased during this cycle
Additional sales over the last five years increased its profitability as the 83.3% annual growth in its earnings per share outpaced its revenue
Impressive free cash flow profitability enables the company to fund new investments or reward investors with share buybacks/dividends, and its recently improved profitability means it has even more resources to invest or distribute
Nvidia is trading at $110.94 per share, or 25.4x forward price-to-earnings. Is now the right time to buy? See for yourself in our in-depth research report, it's free.
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 6 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 Broadcom (+634% 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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