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".
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 are two profitable companies that generate reliable profits without sacrificing growth and one best left off your watchlist.
One Stock to Sell:
Microchip Technology (MCHP)
Trailing 12-Month GAAP Operating Margin: 2.6%
Spun out from General Instrument in 1987, Microchip Technology (NASDAQ: MCHP) is a leading provider of microcontrollers and integrated circuits used mainly in the automotive world, especially in electric vehicles and their charging devices.
Why Are We Out on MCHP?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 4.2% annually over the last five years
- Operating profits fell over the last five years as its sales dropped and it struggled to adjust its fixed costs
- Free cash flow margin shrank by 15.8 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
Microchip Technology’s stock price of $66.99 implies a valuation ratio of 38.6x forward P/E. Dive into our free research report to see why there are better opportunities than MCHP.
Two Stocks to Watch:
Booking (BKNG)
Trailing 12-Month GAAP Operating Margin: 32.8%
Formerly known as The Priceline Group, Booking Holdings (NASDAQ:BKNG) is the world’s largest online travel agency.
Why Are We Positive On BKNG?
- Has the opportunity to boost monetization through new features and premium offerings as its room nights booked have grown by 9.5% annually over the last two years
- Performance over the past three years was turbocharged by share buybacks, which enabled its earnings per share to grow faster than its revenue
- Strong free cash flow margin of 35.3% enables it to reinvest or return capital consistently
At $5,640 per share, Booking trades at 18.8x forward EV/EBITDA. Is now a good time to buy? See for yourself in our comprehensive research report, it’s free.
Xylem (XYL)
Trailing 12-Month GAAP Operating Margin: 12.4%
Formed through a spinoff, Xylem (NYSE:XYL) manufactures and services engineered products across a wide variety of applications primarily in the water sector.
Why Are We Fans of XYL?
- Impressive 20.1% annual revenue growth over the last two years indicates it’s winning market share this cycle
- Offerings are difficult to replicate at scale and result in a premier gross margin of 37.6%
- Earnings per share have massively outperformed its peers over the last two years, increasing by 15.9% annually
Xylem is trading at $141.87 per share, or 29.3x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
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 9 Market-Beating Stocks. 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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