Not all profitable companies are built to last - some rely on outdated models or unsustainable advantages.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.
Not all profitable companies are created equal, and that’s why we built StockStory - to help you find the ones that truly shine bright. That said, here are two profitable companies that balance growth and profitability and one that may face some trouble.
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 Is LAD Not Exciting?
- Lagging same-store sales over the past two years suggest it might have to change its pricing and marketing strategy to stimulate demand
- Commoditized inventory, bad unit economics, and high competition are reflected in its low gross margin of 15.8%
- High net-debt-to-EBITDA ratio of 7× increases the risk of forced asset sales or dilutive financing if operational performance weakens
Lithia’s stock price of $294.84 implies a valuation ratio of 8.5x forward P/E. To fully understand why you should be careful with LAD, check out our full research report (it’s free).
Two Stocks to Watch:
Carvana (CVNA)
Trailing 12-Month GAAP Operating Margin: 9.2%
Known for its glass tower car vending machines, Carvana (NYSE:CVNA) provides a convenient automotive shopping experience by offering an online platform for buying and selling used cars.
Why Does CVNA Catch Our Eye?
- Retail Units Sold are rising, meaning the company can increase revenue without incurring additional customer acquisition costs if it can cross-sell additional products and features
- Incremental sales significantly boosted profitability as its annual earnings per share growth of 40.5% over the last three years outstripped its revenue performance
- Free cash flow margin grew by 22 percentage points over the last few years, giving the company more chips to play with
Carvana is trading at $354.75 per share, or 20.8x forward EV/EBITDA. Is now a good time to buy? See for yourself in our full research report, it’s free.
Colgate-Palmolive (CL)
Trailing 12-Month GAAP Operating Margin: 21.4%
Formed after the 1928 combination between toothpaste maker Colgate and soap maker Palmolive-Peet, Colgate-Palmolive (NYSE:CL) is a consumer products company that focuses on personal, household, and pet products.
Why Do We Like CL?
- Unique products and pricing power lead to a best-in-class gross margin of 60.2%
- CL is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders
- Industry-leading 40.1% return on capital demonstrates management’s skill in finding high-return investments, and its returns are climbing as it finds even more attractive growth opportunities
At $85 per share, Colgate-Palmolive trades at 22.3x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
Stocks We Like Even More
Trump’s April 2024 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 Growth Stocks for this month. 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 Exlservice (+354% 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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