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".
Not all profitable companies are created equal, and that’s why we built StockStory - to help you find the ones that truly shine bright. 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:
Artivion (AORT)
Trailing 12-Month GAAP Operating Margin: 10%
Formerly known as CryoLife until its 2022 rebranding, Artivion (NYSE: AORT) develops and manufactures medical devices and preserves human tissues used in cardiac and vascular surgical procedures for patients with aortic disease.
Why Do We Pass on AORT?
- 7.1% annual revenue growth over the last five years was slower than its healthcare peers
- Modest revenue base of $388.5 million gives it less fixed cost leverage and fewer distribution channels than larger companies
- Incremental sales over the last five years were much less profitable as its earnings per share fell by 5.1% annually while its revenue grew
At $23.39 per share, Artivion trades at 48.5x forward price-to-earnings. To fully understand why you should be careful with AORT, check out our full research report (it’s free).
RadNet (RDNT)
Trailing 12-Month GAAP Operating Margin: 5.7%
With over 350 imaging facilities across seven states and a growing artificial intelligence division, RadNet (NASDAQ: RDNT) operates a network of outpatient diagnostic imaging centers across the United States, offering services like MRI, CT scans, PET scans, mammography, and X-rays.
Why Do We Think Twice About RDNT?
- Modest revenue base of $1.83 billion gives it less fixed cost leverage and fewer distribution channels than larger companies
- 10 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
- Below-average returns on capital indicate management struggled to find compelling investment opportunities
RadNet’s stock price of $50.14 implies a valuation ratio of 74.8x forward price-to-earnings. If you’re considering RDNT for your portfolio, see our FREE research report to learn more.
One Stock to Buy:
Axon (AXON)
Trailing 12-Month GAAP Operating Margin: 2.8%
Providing body cameras and tasers for first responders, AXON (NASDAQ: AXON) develops technology solutions and weapons products for military, law enforcement, and civilians.
Why Will AXON Beat the Market?
- Products are seeing elevated demand as its unit sales averaged 37% growth over the past two years
- Free cash flow margin jumped by 28.4 percentage points over the last five years, giving the company more resources to pursue growth initiatives, repurchase shares, or pay dividends
- Rising returns on capital show the company is starting to reap the benefits of its past investments
Axon is trading at $579.99 per share, or 92.7x forward price-to-earnings. Is now the time to initiate a position? Find out in our full research report, it’s free.
Stocks We Like Even More
Market indices reached historic highs following Donald Trump’s presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth.
While this has caused many investors to adopt a "fearful" wait-and-see approach, we’re leaning into our best ideas that can grow regardless of the political or macroeconomic climate. Take advantage of Mr. Market 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 Comfort Systems (+751% five-year return). Find your next big winner with StockStory today for free.
