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. Keeping that in mind, here is one profitable company that leverages its financial strength to beat the competition and two that may struggle to keep up.
Two Stocks to Sell:
El Pollo Loco (LOCO)
Trailing 12-Month GAAP Operating Margin: 9.1%
With a name that translates into ‘The Crazy Chicken’, El Pollo Loco (NASDAQ: LOCO) is a fast food chain known for its citrus-marinated, fire-grilled chicken recipe that hails from the coastal town of Sinaloa, Mexico.
Why Do We Avoid LOCO?
- Disappointing same-store sales over the past two years show customers aren’t responding well to its menu offerings and dining experience
- Subscale operations are evident in its revenue base of $497.1 million, meaning it has fewer distribution channels than its larger rivals
- Projected sales growth of 2% for the next 12 months suggests sluggish demand
El Pollo Loco is trading at $16.56 per share, or 17x forward P/E. Check out our free in-depth research report to learn more about why LOCO doesn’t pass our bar.
Planet Fitness (PLNT)
Trailing 12-Month GAAP Operating Margin: 29.9%
Founded by two brothers who purchased a struggling gym, Planet Fitness (NYSE: PLNT) is a gym franchise that caters to casual fitness users by providing a friendly and inclusive atmosphere.
Why Are We Out on PLNT?
- Lagging same-store sales over the past two years suggest it might have to change its pricing and marketing strategy to stimulate demand
- Capital intensity will likely increase as its free cash flow margin is anticipated to drop by 6.6 percentage points over the next year
- Unchanged returns on capital make it difficult for the company’s valuation multiple to re-rate
At $50.98 per share, Planet Fitness trades at 15.6x forward P/E. If you’re considering PLNT for your portfolio, see our FREE research report to learn more.
One Stock to Watch:
Maximus (MMS)
Trailing 12-Month GAAP Operating Margin: 10.2%
With nearly 50 years of experience translating public policy into operational programs that serve millions of citizens, Maximus (NYSE: MMS) provides operational services, clinical assessments, and technology solutions to government agencies in the U.S. and internationally.
Why Are We Fans of MMS?
- Adjusted operating margin improvement of 2.6 percentage points over the last five years demonstrates its ability to scale efficiently
- Share buybacks catapulted its annual earnings per share growth to 21.2%, which outperformed its revenue gains over the last two years
- Returns on capital are growing as management capitalizes on its market opportunities
Maximus’s stock price of $57.60 implies a valuation ratio of 6.4x forward P/E. Is now a good time to buy? Find out in our full 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-micro-cap company Tecnoglass (+1,552% between June 2020 and June 2025). Find your next big winner with StockStory today.
