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 are two profitable companies that balance growth and profitability and one that may struggle to keep up.
One Stock to Sell:
Hershey (HSY)
Trailing 12-Month GAAP Operating Margin: 16.8%
Best known for its milk chocolate bar and Hershey's Kisses, Hershey (NYSE:HSY) is an iconic company known for its chocolate products.
Why Are We Cautious About HSY?
- Shrinking unit sales over the past two years imply it may need to invest in product improvements to get back on track
- Efficiency has decreased over the last year as its operating margin fell by 5.2 percentage points
- Performance over the past three years shows its incremental sales were much less profitable, as its earnings per share fell by 3.8% annually
Hershey’s stock price of $171.41 implies a valuation ratio of 27.4x forward P/E. Check out our free in-depth research report to learn more about why HSY doesn’t pass our bar.
Two Stocks to Watch:
Yum! Brands (YUM)
Trailing 12-Month GAAP Operating Margin: 30.9%
Spun off as an independent company from PepsiCo, Yum! Brands (NYSE:YUM) is a multinational corporation that owns KFC, Pizza Hut, Taco Bell, and The Habit Burger Grill.
Why Do We Like YUM?
- Aggressive expansion of new stores reflects an offensive push to quickly grow and sell in markets where it has few or no locations
- Highly efficient business model is illustrated by its impressive 31.7% operating margin
- Strong free cash flow margin of 19.2% enables it to reinvest or return capital consistently
At $150.63 per share, Yum! Brands trades at 23.2x forward P/E. Is now the right time to buy? See for yourself in our full research report, it’s free for active Edge members.
Cintas (CTAS)
Trailing 12-Month GAAP Operating Margin: 22.9%
Starting as a family business collecting and cleaning shop rags in Cincinnati, Cintas (NASDAQ:CTAS) provides corporate identity uniforms, facility services, and safety products to over one million businesses across North America.
Why Is CTAS a Top Pick?
- Annual revenue growth of 8.5% over the last five years beat the sector average and underscores the unique value of its offerings
- Performance over the past five years was turbocharged by share buybacks, which enabled its earnings per share to grow faster than its revenue
- CTAS is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders
Cintas is trading at $185.20 per share, or 37.3x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free for active Edge members.
High-Quality Stocks for All Market Conditions
Donald Trump’s April 2025 "Liberation Day" tariffs sent markets into a tailspin, but stocks have since rebounded strongly, proving that knee-jerk reactions often create the best buying opportunities.
The smart money is already positioning for the next leg up. Don’t miss out on the recovery - check out our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today
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