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.
Profits are valuable, but they’re not everything. At StockStory, we help you identify the companies that have real staying power. Keeping that in mind, here is one profitable company that leverages its financial strength to beat the competition and two that may face some trouble.
Two Stocks to Sell:
Five Below (FIVE)
Trailing 12-Month GAAP Operating Margin: 8.3%
Often facilitating a treasure hunt shopping experience, Five Below (NASDAQ:FIVE) is an American discount retailer that sells a variety of products from mobile phone cases to candy to sports equipment for largely $5 or less.
Why Are We Wary of FIVE?
- Weak same-store sales trends over the past two years suggest there may be few opportunities in its core markets to open new locations
- Revenue base of $4.23 billion puts it at a disadvantage compared to larger competitors exhibiting economies of scale
- Underwhelming 10.8% return on capital reflects management’s difficulties in finding profitable growth opportunities, and its decreasing returns suggest its historical profit centers are aging
At $149.46 per share, Five Below trades at 27.7x forward P/E. To fully understand why you should be careful with FIVE, check out our full research report (it’s free for active Edge members).
Brink's (BCO)
Trailing 12-Month GAAP Operating Margin: 11.7%
Known for its iconic armored trucks that have been a fixture in American cities since 1859, Brink's (NYSE:BCO) provides secure transportation and management of cash and valuables for banks, retailers, and other businesses worldwide.
Why Does BCO Fall Short?
- Annual revenue growth of 3.5% over the last two years was below our standards for the business services sector
- 1.1 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
- Low returns on capital reflect management’s struggle to allocate funds effectively
Brink's is trading at $111.61 per share, or 13x forward P/E. If you’re considering BCO for your portfolio, see our FREE research report to learn more.
One Stock to Buy:
Sterling (STRL)
Trailing 12-Month GAAP Operating Margin: 14.8%
Involved in the construction of a major highway, the Grand Parkway in Houston, TX, Sterling Infrastructure (NASDAQ:STRL) provides civil infrastructure construction.
Why Is STRL a Top Pick?
- Offerings and unique value proposition resonate with customers, as seen in its above-market 9.9% annual sales growth over the last five years
- Free cash flow margin increased by 12.1 percentage points over the last five years, giving the company more capital to invest or return to shareholders
- Rising returns on capital show management is finding more attractive investment opportunities
Sterling’s stock price of $355.77 implies a valuation ratio of 33.8x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free for active Edge members.
Stocks We Like Even More
Trump’s April 2025 tariff bombshell triggered a massive market selloff, but stocks have since staged an impressive recovery, leaving those who panic sold on the sidelines.
Take advantage of the rebound by checking out our Top 5 Growth Stocks for this month. 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 Comfort Systems (+782% 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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