Not all profitable companies are built to last - some rely on outdated models or unsustainable advantages. Just because a business is in the green today doesn’t mean it will thrive tomorrow.
A business making money today isn’t necessarily a winner, which is why we analyze companies across multiple dimensions at StockStory. Keeping that in mind, here is one profitable company that balances growth and profitability and two that may struggle to keep up.
Two Stocks to Sell:
PTC (PTC)
Trailing 12-Month GAAP Operating Margin: 30%
Originally known as Parametric Technology Corporation until its 2013 rebranding, PTC (NASDAQ: PTC) provides software that helps manufacturers design, develop, and service physical products through digital solutions for CAD, PLM, ALM, and SLM.
Why Do We Think Twice About PTC?
- Customers were hesitant to make long-term commitments to its software as its 11.1% average ARR growth over the last year was sluggish
- Anticipated sales growth of 12.3% for the next year implies demand will be shaky
- Operating profits and efficiency rose over the last year as it benefited from some fixed cost leverage
At $200.85 per share, PTC trades at 8.6x forward price-to-sales. Check out our free in-depth research report to learn more about why PTC doesn’t pass our bar.
Sealed Air (SEE)
Trailing 12-Month GAAP Operating Margin: 13.7%
Founded in 1960, Sealed Air Corporation (NYSE: SEE) specializes in the development and production of protective and food packaging solutions, serving a variety of industries.
Why Do We Think SEE Will Underperform?
- Declining unit sales over the past two years suggest it might have to lower prices to accelerate growth
- Earnings per share decreased by more than its revenue over the last two years, showing each sale was less profitable
- Diminishing returns on capital suggest its earlier profit pools are drying up
Sealed Air is trading at $33.21 per share, or 11.1x forward P/E. Dive into our free research report to see why there are better opportunities than SEE.
One Stock to Watch:
CAVA (CAVA)
Trailing 12-Month GAAP Operating Margin: 4.9%
Starting from a single Washington, D.C. location, CAVA (NYSE: CAVA) operates a fast-casual restaurant chain offering customizable Mediterranean-inspired dishes.
Why Is CAVA Interesting?
- Average same-store sales growth of 11.8% over the past two years indicates its restaurants are resonating with diners
- Earnings growth has trumped its peers over the last one years as its EPS has compounded at 200% annually
- Free cash flow margin increased by 3.1 percentage points over the last year, giving the company more capital to invest or return to shareholders
CAVA’s stock price of $58.60 implies a valuation ratio of 102.1x forward P/E. Is now a good time to buy? See for yourself in our comprehensive research report, it’s free for active Edge members .
High-Quality Stocks for All Market Conditions
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