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 are two profitable companies that leverage their financial strength to beat the competition and one that may face some trouble.
One Stock to Sell:
Lennar (LEN)
Trailing 12-Month GAAP Operating Margin: 9.7%
One of the largest homebuilders in America, Lennar (NYSE: LEN) is known for constructing affordable, move-up, and retirement homes across a range of markets and communities.
Why Do We Think LEN Will Underperform?
- Sales pipeline suggests its future revenue growth won’t meet our standards as its backlog averaged 19.2% declines over the past two years
- Incremental sales over the last two years were much less profitable as its earnings per share fell by 15.2% annually while its revenue grew
- 12.4 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
Lennar is trading at $127.43 per share, or 13.3x forward P/E. Read our free research report to see why you should think twice about including LEN in your portfolio.
Two Stocks to Buy:
Cal-Maine (CALM)
Trailing 12-Month GAAP Operating Margin: 36.2%
Known for brands such as Egg-Land’s Best and Land O’ Lakes, Cal-Maine (NASDAQ: CALM) produces, packages, and distributes eggs.
Why Do We Love CALM?
- Impressive 33.9% annual revenue growth over the last three years indicates it’s winning market share
- Incremental sales significantly boosted profitability as its annual earnings per share growth of 110% over the last three years outstripped its revenue performance
- Robust free cash flow margin of 20.8% gives it many options for capital deployment, and its growing cash flow gives it even more resources to deploy
Cal-Maine’s stock price of $100.80 implies a valuation ratio of 7.1x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
Philip Morris (PM)
Trailing 12-Month GAAP Operating Margin: 36.3%
Founded in 1847, Philip Morris International (NYSE: PM) manufactures and sells a wide range of tobacco and nicotine-containing products, including cigarettes, heated tobacco products, and oral nicotine pouches.
Why Are We Bullish on PM?
- Products are seeing elevated demand as its unit sales averaged 3% growth over the past two years
- Differentiated product offerings are difficult to replicate at scale and result in a best-in-class gross margin of 65.3%
- PM is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders
At $162.90 per share, Philip Morris trades at 20.4x forward P/E. Is now the time to initiate a position? See for yourself in our full research report, it’s free.
Stocks We Like Even More
Donald Trump’s April 2025 "Liberation Day" tariffs sent markets into a tailspin, but stocks have since rebounded strongly, proving that knee-jerk reactions often create the best buying opportunities.
The smart money is already positioning for the next leg up. Don’t miss out on the recovery - check out our Top 9 Market-Beating Stocks. 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-small-cap company Exlservice (+354% 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
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