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 is one profitable company that generates reliable profits without sacrificing growth and two that may face some trouble.
Two Stocks to Sell:
Spectrum Brands (SPB)
Trailing 12-Month GAAP Operating Margin: 4.1%
A leader in multiple consumer product categories, Spectrum Brands (NYSE: SPB) is a diversified company with a portfolio of trusted brands spanning home appliances, garden care, personal care, and pet care.
Why Is SPB Risky?
- Core business is underperforming as its organic revenue has disappointed over the past two years, suggesting it might need acquisitions to stimulate growth
- Cash-burning tendencies make us wonder if it can sustainably generate shareholder value
- ROIC of 0.8% reflects management’s challenges in identifying attractive investment opportunities
At $55.20 per share, Spectrum Brands trades at 13.5x forward P/E. Check out our free in-depth research report to learn more about why SPB doesn’t pass our bar.
ICU Medical (ICUI)
Trailing 12-Month GAAP Operating Margin: 5.2%
Founded in 1984 and named for its initial focus on intensive care units, ICU Medical (NASDAQ: ICUI) develops and manufactures medical products for infusion therapy, vascular access, and vital care applications used in hospitals and other healthcare settings.
Why Are We Out on ICUI?
- Sales trends were unexciting over the last two years as its 1.3% annual growth was below the typical healthcare company
- Projected sales decline of 11% for the next 12 months points to a tough demand environment ahead
- Incremental sales over the last five years were much less profitable as its earnings per share fell by 19.1% annually while its revenue grew
ICU Medical’s stock price of $130.81 implies a valuation ratio of 17.7x forward P/E. If you’re considering ICUI for your portfolio, see our FREE research report to learn more.
One Stock to Watch:
KBR (KBR)
Trailing 12-Month GAAP Operating Margin: 8.7%
Known for projects like the construction of Guantanamo Bay, KBR provides professional services and technologies, specializing in engineering, construction, and government services sectors.
Why Are We Positive On KBR?
- Annual revenue growth of 9.9% over the last two years beat the sector average and underscores the unique value of its offerings
- Operating margin improvement of 6.3 percentage points over the last five years demonstrates its ability to scale efficiently
- Performance over the past five years was turbocharged by share buybacks, which enabled its earnings per share to grow faster than its revenue
KBR is trading at $49.64 per share, or 12.9x forward P/E. Is now a good time to buy? See for yourself in our full research report, it’s free.
Stocks We Like Even More
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