Even if a company is profitable, it doesn’t always mean it’s a great investment. Some struggle to maintain growth, face looming threats, or fail to reinvest wisely, limiting their future potential.
Profits are valuable, but they’re not everything. At StockStory, we help you identify the companies that have real staying power. That said, here are two profitable companies that generate reliable profits without sacrificing growth and one that may struggle to keep up.
One Stock to Sell:
Lithia (LAD)
Trailing 12-Month GAAP Operating Margin: 4.5%
With a strong presence in the Western US, Lithia Motors (NYSE: LAD) sells a wide range of vehicles, including new and used cars, trucks, SUVs, and luxury vehicles from various manufacturers.
Why Do We Think Twice About LAD?
- Weak same-store sales trends over the past two years suggest there may be few opportunities in its core markets to open new locations
- Widely-available products (and therefore stiff competition) result in an inferior gross margin of 15.8% that must be offset through higher volumes
- High net-debt-to-EBITDA ratio of 7× could force the company to raise capital at unfavorable terms if market conditions deteriorate
Lithia is trading at $323.50 per share, or 9.3x forward P/E. Check out our free in-depth research report to learn more about why LAD doesn’t pass our bar.
Two Stocks to Watch:
Tractor Supply (TSCO)
Trailing 12-Month GAAP Operating Margin: 9.7%
Started as a mail-order tractor parts business, Tractor Supply (NASDAQ: TSCO) is a retailer of general goods such as agricultural supplies, hardware, and pet food for the rural consumer.
Why Are We Fans of TSCO?
- Rapidly increasing store base reflects a desire to sell in new markets and scale quickly
- Projected revenue growth of 6.7% for the next 12 months suggests its momentum from the last six years will persist
- ROIC punches in at 33.5%, illustrating management’s expertise in identifying profitable investments
At $55.92 per share, Tractor Supply trades at 25.3x forward P/E. Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.
Tenet Healthcare (THC)
Trailing 12-Month GAAP Operating Margin: 17.8%
With a network spanning nine states and serving primarily urban and suburban communities, Tenet Healthcare (NYSE: THC) operates a nationwide network of hospitals, ambulatory surgery centers, and outpatient facilities providing acute care and specialty healthcare services.
Why Does THC Stand Out?
- Share repurchases have amplified shareholder returns as its annual earnings per share growth of 29.1% exceeded its revenue gains over the last five years
- Market-beating returns on capital illustrate that management has a knack for investing in profitable ventures, and its returns are climbing as it finds even more attractive growth opportunities
- Returns on capital are growing as management capitalizes on its market opportunities
Tenet Healthcare’s stock price of $201.34 implies a valuation ratio of 15.5x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
Trump’s April 2025 tariff bombshell triggered a massive market selloff, but stocks have since staged an impressive recovery, leaving those who panic sold on the sidelines.
Take advantage of the rebound by checking out our Top 5 Strong Momentum 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-small-cap company Comfort Systems (+782% 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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