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".
Not all profitable companies are created equal, and that’s why we built StockStory - to help you find the ones that truly shine bright. Keeping that in mind, here is one profitable company that balances growth and profitability 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?
- 4% annual revenue growth over the last five years was slower than its semiconductor peers
- Gross margin of 29.1% is below its competitors, leaving less money to invest in areas like marketing and R&D
- Low free cash flow margin of 6.2% for the last two years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
Penguin Solutions is trading at $20.30 per share, or 9.8x forward P/E. If you’re considering PENG for your portfolio, see our FREE research report to learn more.
Sinclair (SBGI)
Trailing 12-Month GAAP Operating Margin: 10.8%
With over 2,400 hours of local news produced weekly and 640 broadcast channels reaching millions of American homes, Sinclair (NASDAQ:SBGI) operates a network of 185 local television stations across 86 U.S. markets, producing news programming and distributing content from major networks.
Why Are We Out on SBGI?
- Sales tumbled by 11.2% annually over the last five years, showing market trends are working against its favor during this cycle
- Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability
- High net-debt-to-EBITDA ratio of 6× could force the company to raise capital at unfavorable terms if market conditions deteriorate
Sinclair’s stock price of $15.27 implies a valuation ratio of 8.7x forward EV-to-EBITDA. Dive into our free research report to see why there are better opportunities than SBGI.
One Stock to Buy:
Ryan Specialty (RYAN)
Trailing 12-Month GAAP Operating Margin: 17.3%
Founded in 2010 by insurance industry veteran Patrick Ryan, Ryan Specialty (NYSE:RYAN) is a wholesale insurance broker and underwriting manager that helps retail brokers place complex or hard-to-place risks with insurance carriers.
Why Is RYAN a Good Business?
- Average organic revenue growth of 12.8% over the past two years demonstrates its ability to expand independently without relying on acquisitions
- Earnings per share grew by 23.1% annually over the last two years and trumped its peers
- Impressive free cash flow profitability enables the company to fund new investments or reward investors with share buybacks/dividends
At $51.83 per share, Ryan Specialty trades at 22.4x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free for active Edge members.
High-Quality Stocks for All Market Conditions
Your portfolio can’t afford to be based on yesterday’s story. The risk in a handful of heavily crowded stocks is rising daily.
The names generating the next wave of massive growth are right here in 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 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 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.