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. That said, here are two profitable companies that leverage their financial strength to beat the competition and one best left off your watchlist.
One Stock to Sell:
Rockwell Automation (ROK)
Trailing 12-Month GAAP Operating Margin: 18%
One of the first companies to address industrial automation, Rockwell Automation (NYSE:ROK) sells products that help customers extract more efficiency from their machinery.
Why Are We Hesitant About ROK?
- Organic sales performance over the past two years indicates the company may need to make strategic adjustments or rely on M&A to catalyze faster growth
- Falling earnings per share over the last two years has some investors worried as stock prices ultimately follow EPS over the long term
- Eroding returns on capital suggest its historical profit centers are aging
Rockwell Automation’s stock price of $414.45 implies a valuation ratio of 33.5x forward P/E. Check out our free in-depth research report to learn more about why ROK doesn’t pass our bar.
Two Stocks to Watch:
Cadence Design Systems (CDNS)
Trailing 12-Month GAAP Operating Margin: 28.5%
Powering the chips behind everything from smartphones to AI accelerators for over 35 years, Cadence Design Systems (NASDAQ:CDNS) provides essential computational software, hardware, and intellectual property used by engineers to design and verify advanced electronic systems and semiconductors.
Why Does CDNS Stand Out?
- Average billings growth of 21.8% over the last year enhances its liquidity and shows there is steady demand for its products
- Software is difficult to replicate at scale and leads to a best-in-class gross margin of 86.6%
- Software platform has product-market fit given the rapid recovery of its customer acquisition costs
At $299.54 per share, Cadence Design Systems trades at 14.2x forward price-to-sales. Is now the right time to buy? Find out in our full research report, it’s free.
Vital Farms (VITL)
Trailing 12-Month GAAP Operating Margin: 11.2%
With an emphasis on ethically produced products, Vital Farms (NASDAQ:VITL) specializes in pasture-raised eggs and butter.
Why Do We Love VITL?
- Unit sales were phenomenal over the past two years, showing demand is robust and retailers can’t stock enough of its products
- Notable projected revenue growth of 26.2% for the next 12 months hints at market share gains
- Earnings growth has trumped its peers over the last three years as its EPS has compounded at 143% annually
Vital Farms is trading at $25.81 per share, or 15.9x forward P/E. Is now the time to initiate a position? See for yourself in our in-depth research report, it’s free.
High-Quality Stocks for All Market Conditions
If your portfolio success hinges on just 4 stocks, your wealth is built on fragile ground. You have a small window to secure high-quality assets before the market widens and these prices disappear.
Don’t wait for the next volatility shock. Check 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 244% over the last five years (as of June 30, 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 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.