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".
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 leverages its financial strength to beat the competition and two best left off your watchlist.
Two Stocks to Sell:
Levi's (LEVI)
Trailing 12-Month GAAP Operating Margin: 7.5%
Credited for inventing the first pair of blue jeans in 1873, Levi's (NYSE: LEVI) is an apparel company renowned for its iconic denim products and classic American style.
Why Do We Steer Clear of LEVI?
- Weak constant currency growth over the past two years indicates challenges in maintaining its market share
- Sales are projected to be flat over the next 12 months and imply weak demand
- Below-average returns on capital indicate management struggled to find compelling investment opportunities, and its decreasing returns suggest its historical profit centers are aging
Levi’s stock price of $15.77 implies a valuation ratio of 12.4x forward price-to-earnings. Dive into our free research report to see why there are better opportunities than LEVI.
Vulcan Materials (VMC)
Trailing 12-Month GAAP Operating Margin: 18.4%
Founded in 1909, Vulcan Materials (NYSE: VMC) is a producer of construction aggregates, primarily crushed stone, sand, and gravel.
Why Does VMC Fall Short?
- Flat sales over the last two years suggest it must find different ways to grow during this cycle
- Sluggish trends in its tons shipped suggest customers aren’t adopting its solutions as quickly as the company hoped
- Free cash flow margin dropped by 3.7 percentage points over the last five years, implying the company became more capital intensive as competition picked up
At $249.41 per share, Vulcan Materials trades at 27.8x forward price-to-earnings. Read our free research report to see why you should think twice about including VMC in your portfolio.
One Stock to Buy:
Wingstop (WING)
Trailing 12-Month GAAP Operating Margin: 26.5%
The passion project of two chicken wing aficionados in Texas, Wingstop (NASDAQ: WING) is a popular fast-food chain known for its flavorful and crispy chicken wings offered in a variety of sauces and seasonings.
Why Will WING Beat the Market?
- Same-store sales growth averaged 19.3% over the past two years, showing it’s bringing new and repeat diners into its restaurants
- Healthy operating margin of 25.6% shows it’s a well-run company with efficient processes, and its profits increased over the last year as it scaled
- Strong free cash flow margin of 17.2% enables it to reinvest or return capital consistently
Wingstop is trading at $220 per share, or 51.2x forward price-to-earnings. Is now the right time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.
While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio by checking out our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.
Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Axon (+711% five-year return). Find your next big winner with StockStory today for free.
