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.
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 are two profitable companies that balance growth and profitability and one best left off your watchlist.
One Stock to Sell:
Lincoln Educational (LINC)
Trailing 12-Month GAAP Operating Margin: 4.9%
Established in 1946, Lincoln Educational (NASDAQ: LINC) is a provider of specialized technical training in the United States, offering career-oriented programs to provide practical skills required in the workforce.
Why Is LINC Risky?
- Performance surrounding its enrolled students has lagged its peers
- Cash-burning history makes us doubt the long-term viability of its business model
- Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability
At $19.92 per share, Lincoln Educational trades at 9.8x forward EV-to-EBITDA. Read our free research report to see why you should think twice about including LINC in your portfolio.
Two Stocks to Buy:
Copart (CPRT)
Trailing 12-Month GAAP Operating Margin: 36.5%
Starting as a single salvage yard in California in 1982, Copart (NASDAQ: CPRT) operates an online auction platform that connects sellers of damaged and salvage vehicles with buyers ranging from dismantlers and rebuilders to used car dealers and exporters.
Why Are We Backing CPRT?
- Market share has increased this cycle as its 16.1% annual revenue growth over the last five years was exceptional
- Additional sales over the last five years increased its profitability as the 20% annual growth in its earnings per share outpaced its revenue
- CPRT is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders, and its improved cash conversion implies it’s becoming a less capital-intensive business
Copart’s stock price of $48.53 implies a valuation ratio of 28.8x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
Stride (LRN)
Trailing 12-Month GAAP Operating Margin: 15%
Formerly known as K12, Stride (NYSE: LRN) is an education technology company providing education solutions through digital platforms.
Why Will LRN Beat the Market?
- Rise in enrollments indicates high demand for its offerings
- Performance over the past two years shows its incremental sales were extremely profitable, as its annual earnings per share growth of 56.8% outpaced its revenue gains
- Free cash flow margin jumped by 8.6 percentage points over the last five years, giving the company more resources to pursue growth initiatives, repurchase shares, or pay dividends
Stride is trading at $164.26 per share, or 20.5x forward P/E. Is now a good time to buy? See for yourself in our in-depth research report, it’s free.
High-Quality Stocks for All Market Conditions
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