Even if a company is profitable, it doesn’t always mean it’s 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. That said, here is one profitable company that leverages its financial strength to beat the competition and two that may struggle to keep up.
Trailing 12-Month GAAP Operating Margin: 16.7%
Founded by Dave Thomas in 1969, Wendy’s (NASDAQ:WEN) is a renowned fast-food chain known for its fresh, never-frozen beef burgers, flavorful menu options, and commitment to quality.
Why Are We Hesitant About WEN?
Disappointing same-store sales over the past two years show customers aren’t responding well to its menu offerings and dining experience
Projected sales are flat for the next 12 months, implying demand will slow from its six-year trend
High net-debt-to-EBITDA ratio of 7× increases the risk of forced asset sales or dilutive financing if operational performance weakens
Wendy’s stock price of $9.87 implies a valuation ratio of 9.7x forward P/E. Read our free research report to see why you should think twice about including WEN in your portfolio, it’s free.
Trailing 12-Month GAAP Operating Margin: 16.7%
Born from a corporate transformation completed in 2023, Crane NXT (NYSE:CXT) provides specialized technology solutions for payment processing, banknote security, and authentication systems for financial institutions and businesses.
Why Does CXT Give Us Pause?
Core business is underperforming as its organic revenue has disappointed over the past two years, suggesting it might need acquisitions to stimulate growth
Subscale operations are evident in its revenue base of $1.50 billion, meaning it has fewer distribution channels than its larger rivals
Flat earnings per share over the last one years underperformed the sector average
Crane NXT is trading at $59.34 per share, or 13.5x forward P/E. If you’re considering CXT for your portfolio, see our FREE research report to learn more.
Trailing 12-Month GAAP Operating Margin: 32.7%
Started by Stanford students Larry Page and Sergey Brin in a Menlo Park garage, Alphabet (NASDAQ:GOOGL) is the parent company of the eponymous Google Search engine, Google Cloud Platform, and YouTube.
Why Do We Love GOOGL?
Alphabet’s dominant Google Search sits on the pantheon of the best businesses ever. This is reflected in its robust long-term revenue growth and elite operating margin.
The company’s profit margins have become even higher over time, speaking to its scale advantages and operating efficiency not only in its core Search business but also in Google Cloud Platform and YouTube.
Revenue growth and increasing operating margins are the key ingredients for strong EPS growth. Google has these, and when also factoring in its share repurchases, you can see why EPS has exploded over the long term.
