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.
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 are two profitable companies that leverage their financial strength to beat the competition and one that may struggle to keep up.
One Stock to Sell:
Agilysys (AGYS)
Trailing 12-Month GAAP Operating Margin: 14.6%
With a tech stack that powers everything from check-in to checkout at some of the world's top hospitality venues, Agilysys (NASDAQ: AGYS) develops and provides cloud-based and on-premise software solutions for hotels, resorts, casinos, and restaurants to manage operations and enhance guest experiences.
Why Do We Think Twice About AGYS?
- High servicing costs result in a relatively inferior gross margin of 63.1% that must be offset through increased usage
- Operating profits and efficiency rose over the last year as it benefited from some fixed cost leverage
- Free cash flow margin is forecasted to shrink by 4.8 percentage points in the coming year, suggesting the company will consume more capital to keep up with its competitors
At $113.41 per share, Agilysys trades at 8.6x forward price-to-sales. If you’re considering AGYS for your portfolio, see our FREE research report to learn more.
Two Stocks to Watch:
Analog Devices (ADI)
Trailing 12-Month GAAP Operating Margin: 35.5%
Founded by two MIT graduates, Ray Stata and Matthew Lorber in 1965, Analog Devices (NASDAQ: ADI) is one of the largest providers of high performance analog integrated circuits used mainly in industrial end markets, along with communications, autos, and consumer devices.
Why Could ADI Be a Winner?
- Annual revenue growth of 16.4% over the last five years was superb and indicates its market share increased during this cycle
- Offerings are difficult to replicate at scale and lead to a best-in-class gross margin of 63.4%
- ADI is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders, and its recently improved profitability means it has even more resources to invest or distribute
Analog Devices’s stock price of $371.25 implies a valuation ratio of 23.5x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
Watts Water Technologies (WTS)
Trailing 12-Month GAAP Operating Margin: 19.1%
Founded in 1874, Watts Water (NYSE: WTS) specializes in manufacturing water products and systems for residential, commercial, and industrial applications globally.
Why Are We Bullish on WTS?
- Offerings and unique value proposition resonate with customers, as seen in its above-market 9.9% annual sales growth over the last five years
- Share repurchases have amplified shareholder returns as its annual earnings per share growth of 19.2% exceeded its revenue gains over the last five years
- Free cash flow margin jumped by 6.5 percentage points over the last five years, giving the company more resources to pursue growth initiatives, repurchase shares, or pay dividends
Watts Water Technologies is trading at $369.95 per share, or 28x forward P/E. Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.
High-Quality Stocks for All Market Conditions
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.
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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.
