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. 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:
Merit Medical Systems (MMSI)
Trailing 12-Month GAAP Operating Margin: 11.3%
Founded in 1987 and now offering over 1,700 patented products across global markets, Merit Medical Systems (NASDAQ: MMSI) manufactures and markets specialized medical devices used in minimally invasive procedures for cardiology, radiology, oncology, critical care, and endoscopy.
Why Does MMSI Fall Short?
- Subscale operations are evident in its revenue base of $1.48 billion, meaning it has fewer distribution channels than its larger rivals
- Low returns on capital reflect management’s struggle to allocate funds effectively
Merit Medical Systems’s stock price of $87.55 implies a valuation ratio of 22.3x forward P/E. To fully understand why you should be careful with MMSI, check out our full research report (it’s free for active Edge members).
Korn Ferry (KFY)
Trailing 12-Month GAAP Operating Margin: 12.7%
With clients including 97% of the S&P 100 and operations in 103 offices across 51 countries, Korn Ferry (NYSE: KFY) is a global consulting firm that helps organizations design optimal structures, recruit talent, develop leaders, and create effective compensation strategies.
Why Does KFY Worry Us?
- Annual sales declines of 1.3% for the past two years show its products and services struggled to connect with the market during this cycle
- Anticipated sales growth of 2.7% for the next year implies demand will be shaky
- Diminishing returns on capital suggest its earlier profit pools are drying up
At $64.50 per share, Korn Ferry trades at 12.3x forward P/E. Check out our free in-depth research report to learn more about why KFY doesn’t pass our bar.
One Stock to Buy:
Vital Farms (VITL)
Trailing 12-Month GAAP Operating Margin: 11.2%
With an emphasis on ethically produced products, Vital Farms (NASDAQ: VITL) specializes in pasture-raised eggs and butter.
Why Will VITL Outperform?
- Unit sales were phenomenal over the past two years, showing demand is robust and retailers can’t stock enough of its products
- Notable projected revenue growth of 26.7% for the next 12 months hints at market share gains
- Earnings per share have massively outperformed its peers over the last three years, increasing by 143% annually
Vital Farms is trading at $34.91 per share, or 21.5x forward P/E. Is now the right time to buy? See for yourself in our comprehensive research report, it’s free for active Edge members .
High-Quality Stocks for All Market Conditions
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