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 are two profitable companies that generate reliable profits without sacrificing growth and one best left off your watchlist.
One Stock to Sell:
Lockheed Martin (LMT)
Trailing 12-Month GAAP Operating Margin: 11.9%
Headquartered in Maryland, Famous for the F-35 aircraft, Lockheed Martin (NYSE: LMT) specializes in defense, space, homeland security, and information technology products.
Why Do We Think LMT Will Underperform?
- Large revenue base makes it harder to increase sales quickly, and its annual revenue growth of 2.9% over the last five years was below our standards for the industrials sector
- Performance over the past two years shows its incremental sales were less profitable as its earnings per share were flat
- Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability
Lockheed Martin’s stock price of $509.00 implies a valuation ratio of 16.6x forward P/E. Check out our free in-depth research report to learn more about why LMT doesn’t pass our bar.
Two Stocks to Watch:
NMI Holdings (NMIH)
Trailing 12-Month GAAP Operating Margin: 73.2%
Founded in the aftermath of the 2008 housing crisis to bring new capacity to the mortgage insurance market, NMI Holdings (NASDAQ: NMIH) provides mortgage insurance that protects lenders against losses when homebuyers default on their mortgage loans.
Why Could NMIH Be a Winner?
- Pre-tax profits and efficiency rose over the last five years as it benefited from some fixed cost leverage
- Annual book value per share growth of 16.1% over the past five years was outstanding, reflecting strong capital accumulation this cycle
- Market-beating return on equity illustrates that management has a knack for investing in profitable ventures
NMI Holdings is trading at $37.34 per share, or 1.1x forward P/B. Is now a good time to buy? Find out in our full research report, it’s free.
Cactus (WHD)
Trailing 12-Month GAAP Operating Margin: 18.6%
Named for the spiky wellhead equipment that reminded founders of desert cacti, Cactus (NYSE: WHD) manufactures wellheads, valves, and spoolable pipes used in drilling and producing oil and gas wells.
Why Do We Like WHD?
- Market share has increased this cycle as its 28.5% annual revenue growth over the last ten years was exceptional
- EBITDA margin didn’t move over the last five years, showing it couldn’t increase its efficiency
- Robust free cash flow margin of 21.7% gives it many options for capital deployment
At $62.25 per share, Cactus trades at 20.2x forward P/E. Is now the time to initiate a position? See for yourself in our in-depth research report, it’s free.
Stocks We Like Even More
WHILE YOU’RE HERE: Top 9 Market-Beating Stocks. The best stocks don’t just beat the market once. They do it again. And again. Robust revenue growth, rising free cash flow, returns on capital that leave their competition in the dust. The market has already rewarded these businesses.
But our AI platform says the party isn’t over. Find out which 9 stocks made the cut this week — FREE. Get Our Top 9 Market-Beating Stocks for Free HERE.
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+271% between June 2020 and June 2025). Find your next big winner with StockStory today.
