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".
Profits are valuable, but they’re not everything. At StockStory, we help you identify the companies that have real staying power. That said, 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:
Hormel Foods (HRL)
Trailing 12-Month GAAP Operating Margin: 8.4%
Best known for its SPAM brand, Hormel (NYSE: HRL) is a packaged foods company with products that span meat, poultry, shelf-stable foods, and spreads.
Why Do We Think HRL Will Underperform?
- Shrinking unit sales over the past two years indicate demand is soft and that the company may need to revise its product strategy
- Gross margin of 16.6% is below its competitors, leaving less money to invest in areas like marketing and production facilities
- Earnings per share decreased by more than its revenue over the last three years, showing each sale was less profitable
Hormel Foods is trading at $22.05 per share, or 16.2x forward P/E. Dive into our free research report to see why there are better opportunities than HRL.
Resideo (REZI)
Trailing 12-Month GAAP Operating Margin: 8.2%
Resideo Technologies, Inc. (NYSE: REZI) is a manufacturer and distributor of technology-driven products and solutions for home comfort, energy management, water management, and safety and security.
Why Are We Hesitant About REZI?
- Estimated sales growth of 2.9% for the next 12 months implies demand will slow from its two-year trend
- 22.8 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
- Diminishing returns on capital suggest its earlier profit pools are drying up
Resideo’s stock price of $31.07 implies a valuation ratio of 11.4x forward P/E. To fully understand why you should be careful with REZI, check out our full research report (it’s free for active Edge members).
One Stock to Buy:
Nubank (NU)
Trailing 12-Month GAAP Operating Margin: 33.7%
With nearly 94 million customers across Brazil, Mexico, and Colombia through its viral member-get-member referral program, Nubank (NYSE: NU) is a digital banking platform that offers financial services including spending, saving, investing, borrowing, and protection products to millions of customers across Latin America.
Why Are We Backing NU?
- Impressive 44.9% annual revenue growth over the last two years indicates it’s winning market share this cycle
- Incremental sales over the last two years have been highly profitable as its earnings per share increased by 99.9% annually, topping its revenue gains
At $15.90 per share, Nubank trades at 20.9x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free for active Edge members.
High-Quality Stocks for All Market Conditions
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 Strong Momentum Stocks for this week. 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).
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