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 are two profitable companies that generate reliable profits without sacrificing growth and one that may struggle to keep up.
One Stock to Sell:
Sally Beauty (SBH)
Trailing 12-Month GAAP Operating Margin: 8.9%
Catering to both everyday consumers as well as salon professionals, Sally Beauty (NYSE: SBH) is a retailer that sells salon-quality beauty products such as makeup and haircare products.
Why Are We Out on SBH?
- Weak same-store sales trends over the past two years suggest there may be few opportunities in its core markets to open new locations
- Smaller revenue base of $3.69 billion means it hasn’t achieved the economies of scale that some industry juggernauts enjoy
- Earnings per share have dipped by 2.7% annually over the past six years, which is concerning because stock prices follow EPS over the long term
Sally Beauty is trading at $14.01 per share, or 7.1x forward P/E. Dive into our free research report to see why there are better opportunities than SBH.
Two Stocks to Watch:
Dynatrace (DT)
Trailing 12-Month GAAP Operating Margin: 12.2%
With its platform processing over 30 trillion pieces of IT performance data daily, Dynatrace (NYSE: DT) provides an AI-powered platform that helps organizations monitor, secure, and optimize their applications and IT infrastructure across cloud environments.
Why Could DT Be a Winner?
- Annual revenue growth of 19.5% over the last two years was superb and indicates its market share is rising
- Prominent and differentiated software results in a stellar gross margin of 81.8%
- Robust free cash flow margin of 25.5% gives it many options for capital deployment
At $46.94 per share, Dynatrace trades at 6.7x forward price-to-sales. Is now the time to initiate a position? Find out in our full research report, it’s free for active Edge members.
Taboola (TBLA)
Trailing 12-Month GAAP Operating Margin: 2.5%
Often appearing as those "You May Also Like" or "Recommended For You" boxes at the bottom of news articles, Taboola (NASDAQ: TBLA) operates a digital platform that recommends personalized content to users across publisher websites, helping both publishers monetize their sites and advertisers reach target audiences.
Why Are We Positive On TBLA?
- Market share has increased this cycle as its 16.3% annual revenue growth over the last two years was exceptional
- Free cash flow margin increased by 4.5 percentage points over the last five years, giving the company more capital to invest or return to shareholders
- Historical investments are beginning to pay off as its returns on capital are growing
Taboola’s stock price of $3.79 implies a valuation ratio of 13.1x forward EV-to-EBITDA. 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
Fresh US-China trade tensions just tanked stocks—but strong bank earnings are fueling a sharp rebound. Don’t miss the bounce.
Don’t let fear keep you from great opportunities and take a look at 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).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today
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