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 is one profitable company that generates reliable profits without sacrificing growth and two that may struggle to keep up.
Two Stocks to Sell:
Herc (HRI)
Trailing 12-Month GAAP Operating Margin: 12.8%
Formerly a subsidiary of Hertz Corporation and with a logo that still bears some similarities to its former parent, Herc Holdings (NYSE:HRI) provides equipment rental and related services to a wide range of industries.
Why Do We Think Twice About HRI?
- Earnings per share fell by 15.2% annually over the last two years while its revenue grew, showing its incremental sales were much less profitable
- Free cash flow margin shrank by 9.4 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
- 6× net-debt-to-EBITDA ratio shows it’s overleveraged and increases the probability of shareholder dilution if things turn unexpectedly
Herc’s stock price of $174.68 implies a valuation ratio of 23.6x forward P/E. To fully understand why you should be careful with HRI, check out our full research report (it’s free).
KB Home (KBH)
Trailing 12-Month GAAP Operating Margin: 8.4%
The first homebuilder to be listed on the NYSE, KB Home (NYSE:KB) is a homebuilding company targeting the first-time home buyer and move-up buyer markets.
Why Do We Avoid KBH?
- Demand cratered as it couldn’t win new orders over the past two years, leading to an average 21.6% decline in its backlog
- Earnings per share have dipped by 4.1% annually over the past two years, which is concerning because stock prices follow EPS over the long term
- Waning returns on capital imply its previous profit engines are losing steam
KB Home is trading at $64.01 per share, or 15.2x forward P/E. Read our free research report to see why you should think twice about including KBH in your portfolio.
One Stock to Buy:
Baldwin Insurance Group (BWIN)
Trailing 12-Month GAAP Operating Margin: 5.5%
Rebranded from BRP Group in May 2024, Baldwin Insurance Group (NASDAQ:BWIN) is an independent insurance distribution company that provides tailored insurance, risk management, and employee benefits solutions to businesses and individuals.
Why Do We Love BWIN?
- Existing business lines can expand without risky acquisitions as its organic revenue growth averaged 13.6% over the past two years
- Adjusted operating margin expanded by 7.1 percentage points over the last five years as it scaled and became more efficient
- Earnings growth has trumped its peers over the last two years as its EPS has compounded at 22.5% annually
At $16.70 per share, Baldwin Insurance Group trades at 8.6x 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
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 Growth Stocks for this month. 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.