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.
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 is one profitable company that leverages its financial strength to beat the competition and two that may face some trouble.
Two Stocks to Sell:
Penguin Solutions (PENG)
Trailing 12-Month GAAP Operating Margin: 4.2%
Based in the US, Penguin Solutions (NASDAQ:PENG) is a diversified semiconductor company offering memory, digital, and LED products.
Why Do We Pass on PENG?
- Annual revenue growth of 4% over the last five years was below our standards for the semiconductor sector
- High input costs result in an inferior gross margin of 29.1% that must be offset through higher volumes
- Underwhelming 4.8% return on capital reflects management’s difficulties in finding profitable growth opportunities, and its decreasing returns suggest its historical profit centers are aging
At $22.14 per share, Penguin Solutions trades at 10.9x forward P/E. Check out our free in-depth research report to learn more about why PENG doesn’t pass our bar.
Kohl's (KSS)
Trailing 12-Month GAAP Operating Margin: 3.5%
Founded as a corner grocery store in Milwaukee, Wisconsin, Kohl’s (NYSE:KSS) is a department store chain that sells clothing, cosmetics, electronics, and home goods.
Why Do We Steer Clear of KSS?
- Lagging same-store sales over the past two years suggest it might have to change its pricing and marketing strategy to stimulate demand
- Forecasted revenue decline of 4.1% for the upcoming 12 months implies demand will fall even further
- 5× net-debt-to-EBITDA ratio shows it’s overleveraged and increases the probability of shareholder dilution if things turn unexpectedly
Kohl's is trading at $15.71 per share, or 29.2x forward P/E. Read our free research report to see why you should think twice about including KSS in your portfolio.
One Stock to Watch:
Lennox (LII)
Trailing 12-Month GAAP Operating Margin: 19.5%
Based in Texas and founded over a century ago, Lennox (NYSE:LII) is a climate control solutions company offering heating, ventilation, air conditioning, and refrigeration (HVACR) goods.
Why Does LII Stand Out?
- Disciplined cost controls and effective management resulted in a strong long-term operating margin of 16.4%, and it turbocharged its profits by achieving some fixed cost leverage
- Earnings per share have massively outperformed its peers over the last two years, increasing by 22.2% annually
- Stellar returns on capital showcase management’s ability to surface highly profitable business ventures
Lennox’s stock price of $522.37 implies a valuation ratio of 21.4x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free for active Edge members.
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 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 Tecnoglass (+1,754% 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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