Not all profitable companies are built to last - some rely on outdated models or unsustainable advantages. Just because a business is in the green today doesn’t mean it will thrive tomorrow.
A business making money today isn’t necessarily a winner, which is why we analyze companies across multiple dimensions at StockStory. That said, here is one profitable company that generates reliable profits without sacrificing growth and two that may struggle to keep up.
Two Stocks to Sell:
Hilton (HLT)
Trailing 12-Month GAAP Operating Margin: 22%
Founded in 1919, Hilton Worldwide (NYSE: HLT) is a global hospitality company with a portfolio of hotel brands.
Why Should You Sell HLT?
- Revenue per room has underperformed over the past two years, suggesting it may need to develop new facilities
- Free cash flow margin is forecasted to shrink by 3.3 percentage points in the coming year, suggesting the company will consume more capital to keep up with its competitors
- Underwhelming 24.1% return on capital reflects management’s difficulties in finding profitable growth opportunities
At $300.75 per share, Hilton trades at 34.2x forward P/E. Check out our free in-depth research report to learn more about why HLT doesn’t pass our bar.
Expeditors (EXPD)
Trailing 12-Month GAAP Operating Margin: 9.9%
Expeditors (NYSE: EXPD) offers air and ocean freight as well as brokerage services.
Why Are We Cautious About EXPD?
- Sizable revenue base leads to growth challenges as its 3.3% annual revenue increases over the last two years fell short of other industrials companies
- High input costs result in an inferior gross margin of 13.4% that must be offset through higher volumes
- Waning returns on capital imply its previous profit engines are losing steam
Expeditors’s stock price of $162.96 implies a valuation ratio of 27.8x forward P/E. If you’re considering EXPD for your portfolio, see our FREE research report to learn more.
One Stock to Buy:
Primoris (PRIM)
Trailing 12-Month GAAP Operating Margin: 5.7%
Listed on the NASDAQ in 2008, Primoris (NYSE: PRIM) builds, maintains, and upgrades infrastructure in the utility, energy, and civil construction industries.
Why Should You Buy PRIM?
- Demand is greater than supply as the company’s 143% average backlog growth over the past two years shows it’s securing new contracts and accumulating more orders than it can fulfill
- Earnings per share have massively outperformed its peers over the last two years, increasing by 39.1% annually
- Free cash flow margin expanded by 5.9 percentage points over the last five years, providing additional flexibility for investments and share buybacks/dividends
Primoris is trading at $150 per share, or 26.9x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
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