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.
A business making money today isn’t necessarily a winner, which is why we analyze companies across multiple dimensions at StockStory. That said, here are two profitable companies that leverage their financial strength to beat the competition and one that may struggle to keep up.
One Stock to Sell:
Dillard's (DDS)
Trailing 12-Month GAAP Operating Margin: 10.9%
With stores located largely in the Southern and Western US, Dillard’s (NYSE: DDS) is a department store chain that sells clothing, cosmetics, accessories, and home goods.
Why Do We Think Twice About DDS?
- Lack of new stores suggest it’s attempting to increase revenue at existing locations because demand is sluggish
- Disappointing same-store sales over the past two years show customers aren’t responding well to its product selection and store experience
- Earnings per share have contracted by 9.5% annually over the last three years, a headwind for returns as stock prices often echo long-term EPS performance
At $636.93 per share, Dillard's trades at 21x forward P/E. Read our free research report to see why you should think twice about including DDS in your portfolio.
Two Stocks to Watch:
Mirion (MIR)
Trailing 12-Month GAAP Operating Margin: 6.3%
With its technology protecting workers in over 130 countries and equipment used in 80% of cancer centers worldwide, Mirion Technologies (NYSE: MIR) provides radiation detection, measurement, and monitoring solutions for medical, nuclear energy, defense, and scientific research applications.
Why Does MIR Catch Our Eye?
- Impressive 11.8% annual revenue growth over the last five years indicates it’s winning market share this cycle
- Operating profits and efficiency rose over the last five years as it benefited from some fixed cost leverage
- Performance over the past two years shows its incremental sales were extremely profitable, as its annual earnings per share growth of 29.1% outpaced its revenue gains
Mirion is trading at $24.06 per share, or 41.5x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free for active Edge members.
Universal Health Services (UHS)
Trailing 12-Month GAAP Operating Margin: 11.5%
With a network spanning 39 states and three countries, Universal Health Services (NYSE: UHS) operates acute care hospitals and behavioral health facilities across the United States, United Kingdom, and Puerto Rico.
Why Are We Fans of UHS?
- Economies of scale give it more fixed cost leverage than its smaller competitors
- Share repurchases have amplified shareholder returns as its annual earnings per share growth of 15% exceeded its revenue gains over the last five years
- Free cash flow margin grew by 6.9 percentage points over the last five years, giving the company more chips to play with
Universal Health Services’s stock price of $227.40 implies a valuation ratio of 9.5x forward P/E. Is now a good time to buy? See for yourself in our in-depth research report, it’s free for active Edge members.
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