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 that may struggle to keep up.
Two Stocks to Sell:
RingCentral (RNG)
Trailing 12-Month GAAP Operating Margin: 6.7%
Built on its proprietary Message Video Phone (MVP) platform that unifies multiple communication methods, RingCentral (NYSE: RNG) provides AI-driven cloud communications and collaboration solutions that enable businesses to connect through voice, video, messaging, and contact center services.
Why Is RNG Risky?
- Offerings struggled to generate meaningful interest as its average billings growth of 6.5% over the last year did not impress
- Anticipated sales growth of 4.5% for the next year implies demand will be shaky
- Operating profits increased over the last year as the company gained some leverage on its fixed costs and became more efficient
At $72.23 per share, RingCentral trades at 2.4x forward price-to-sales. Check out our free in-depth research report to learn more about why RNG doesn’t pass our bar.
Generac (GNRC)
Trailing 12-Month GAAP Operating Margin: 9.5%
With its name deriving from a combination of “generating” and “AC”, Generac (NYSE: GNRC) offers generators and other power products for residential, industrial, and commercial use.
Why Are We Hesitant About GNRC?
- Sales trends were unexciting over the last two years as its 5.1% annual growth was below the typical industrials company
- Costs have risen faster than its revenue over the last five years, causing its operating margin to decline by 6.7 percentage points
- Earnings per share have contracted by 1.9% annually over the last five years, a headwind for returns as stock prices often echo long-term EPS performance
Generac’s stock price of $208.57 implies a valuation ratio of 20.3x forward P/E. Read our free research report to see why you should think twice about including GNRC in your portfolio.
One Stock to Buy:
Kirby (KEX)
Trailing 12-Month GAAP Operating Margin: 14%
Transporting goods along all U.S. coasts, Kirby (NYSE: KEX) provides inland and coastal marine transportation services.
Why Is KEX a Good Business?
- Market share has increased this cycle as its 11.3% annual revenue growth over the last five years was exceptional
- Share repurchases over the last five years enabled its annual earnings per share growth of 47.2% to outpace its revenue gains
- Free cash flow margin jumped by 10.4 percentage points over the last five years, giving the company more resources to pursue growth initiatives, repurchase shares, or pay dividends
Kirby is trading at $138.34 per share, or 17.8x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+214% between June 2020 and June 2025). Find your next big winner with StockStory today.
