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 is one profitable company that generates reliable profits without sacrificing growth and two that may struggle to keep up.

Two Stocks to Sell:

Insteel (IIIN)

Trailing 12-Month GAAP Operating Margin: 9.2%

Growing from a small wire manufacturer to one of the largest in the U.S., Insteel (NYSE: IIIN) provides steel wire reinforcing products for concrete.

Why Does IIIN Fall Short?

1. Sales trends were unexciting over the last two years as its 5.9% annual growth was below the typical industrials company
2. Free cash flow margin dropped by 8.3 percentage points over the last five years, implying the company became more capital intensive as competition picked up
3. Waning returns on capital imply its previous profit engines are losing steam

At $32.79 per share, Insteel trades at 12x forward P/E. Check out our free in-depth research report to learn more about why IIIN doesn’t pass our bar.

Atlanticus Holdings (ATLC)

Trailing 12-Month GAAP Operating Margin: 10%

Using data analytics to serve the millions of Americans with less-than-perfect credit scores, Atlanticus Holdings (NASDAQ: ATLC) provides technology and services that help lenders offer credit products to consumers often overlooked by traditional financing providers.

Why Is ATLC Not Exciting?

1. Falling earnings per share over the last four years has some investors worried as stock prices ultimately follow EPS over the long term

Atlanticus Holdings is trading at $51.28 per share, or 5.9x forward P/E. Read our free research report to see why you should think twice about including ATLC in your portfolio.

One Stock to Watch:

Granite Construction (GVA)

Trailing 12-Month GAAP Operating Margin: 6.4%

Having played a role in the construction of the Hoover Dam, Granite Construction (NYSE: GVA) is a provider of infrastructure solutions for roads, bridges, and other projects.

Why Could GVA Be a Winner?

1. Market share has increased this cycle as its 12.3% annual revenue growth over the last two years was exceptional
2. Incremental sales significantly boosted profitability as its annual earnings per share growth of 38.9% over the last two years outstripped its revenue performance
3. Free cash flow margin grew by 9.6 percentage points over the last five years, giving the company more chips to play with

Granite Construction’s stock price of $116.50 implies a valuation ratio of 19.3x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.

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