Not all profitable companies are built to last - some rely on outdated models or unsustainable advantages.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 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:
Acadia Healthcare (ACHC)
Trailing 12-Month GAAP Operating Margin: 8.3%
With a network of over 250 facilities serving patients in 38 states and Puerto Rico, Acadia Healthcare (NASDAQ:ACHC) operates facilities providing mental health and substance use disorder treatment services across the United States.
Why Does ACHC Fall Short?
- Weak admissions over the past two years show it’s struggled to increase its sales volumes and had to rely on price increases
- Day-to-day expenses have swelled relative to revenue over the last five years as its adjusted operating margin fell by 5.2 percentage points
- Free cash flow margin dropped by 21.7 percentage points over the last five years, implying the company became more capital intensive as competition picked up
Acadia Healthcare’s stock price of $14.29 implies a valuation ratio of 9x forward P/E. If you’re considering ACHC for your portfolio, see our FREE research report to learn more.
Two Stocks to Watch:
Quanta (PWR)
Trailing 12-Month GAAP Operating Margin: 5.8%
A construction engineering services company, Quanta (NYSE:PWR) provides infrastructure solutions to a variety of sectors, including energy and communications.
Why Should You Buy PWR?
- Backlog has averaged 16.7% growth over the past two years, showing it has a pipeline of unfulfilled orders that will support revenue in the future
- Estimated revenue growth of 12.8% for the next 12 months implies its momentum over the last two years will continue
- Earnings per share grew by 24.3% annually over the last two years, massively outpacing its peers
At $475.03 per share, Quanta trades at 38.8x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
Parker-Hannifin (PH)
Trailing 12-Month GAAP Operating Margin: 20.7%
Founded in 1917, Parker Hannifin (NYSE:PH) is a manufacturer of motion and control systems for a wide variety of mobile, industrial and aerospace markets.
Why Does PH Catch Our Eye?
- Highly efficient business model is illustrated by its impressive 18.2% operating margin, and its rise over the last five years was fueled by some leverage on its fixed costs
- Share repurchases over the last five years enabled its annual earnings per share growth of 20.7% to outpace its revenue gains
- Robust free cash flow margin of 14.8% gives it many options for capital deployment, and its growing cash flow gives it even more resources to deploy
Parker-Hannifin is trading at $945.72 per share, or 29.9x forward P/E. Is now the right time to buy? See for yourself in our in-depth research report, it’s free.
High-Quality Stocks for All Market Conditions
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