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. 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:
Bausch + Lomb (BLCO)
Trailing 12-Month GAAP Operating Margin: 1.8%
With a nearly 170-year history dedicated to vision care and eye health innovation, Bausch + Lomb (NYSE:BLCO) develops and manufactures a comprehensive range of eye health products including contact lenses, pharmaceuticals, surgical devices, and consumer eye care solutions.
Why Are We Wary of BLCO?
- Earnings per share fell by 20.4% annually over the last five years while its revenue grew, showing its incremental sales were much less profitable
- 26.8 percentage point decline in its free cash flow margin over the last five years reflects the company’s increased investments to defend its market position
- Depletion of cash reserves could lead to a fundraising event that triggers shareholder dilution
Bausch + Lomb’s stock price of $16.88 implies a valuation ratio of 20.7x forward P/E. Dive into our free research report to see why there are better opportunities than BLCO.
The Pennant Group (PNTG)
Trailing 12-Month GAAP Operating Margin: 5.2%
Spun off from The Ensign Group in 2019 to focus on non-skilled nursing healthcare services, Pennant Group (NASDAQ:PNTG) operates home health, hospice, and senior living facilities across 13 western and midwestern states, serving patients of all ages including seniors.
Why Do We Think Twice About PNTG?
- Revenue base of $842.6 million puts it at a disadvantage compared to larger competitors exhibiting economies of scale
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 1.3% for the last five years
- ROIC of 6% reflects management’s challenges in identifying attractive investment opportunities
At $29.40 per share, The Pennant Group trades at 23.2x forward P/E. Check out our free in-depth research report to learn more about why PNTG doesn’t pass our bar.
One Stock to Watch:
Veeva Systems (VEEV)
Trailing 12-Month GAAP Operating Margin: 27.9%
Originally named "Verticals onDemand" before rebranding in 2009, Veeva Systems (NYSE:VEEV) provides cloud software, data solutions, and consulting services that help life sciences companies develop and bring products to market more efficiently.
Why Are We Positive On VEEV?
- Well-designed software integrates seamlessly with other workflows, enabling swift payback periods on marketing expenses and customer growth at scale
- Healthy operating margin of 27.9% shows it’s a well-run company with efficient processes, and its operating leverage amplified its profits over the last year
- Impressive free cash flow profitability enables the company to fund new investments or reward investors with share buybacks/dividends
Veeva Systems is trading at $216.20 per share, or 10.7x forward price-to-sales. Is now a good time to buy? See for yourself in our in-depth research report, it’s free for active Edge members.
Stocks We Like Even More
The market’s up big this year - but there’s a catch. Just 4 stocks account for half the S&P 500’s entire gain. That kind of concentration makes investors nervous, and for good reason. While everyone piles into the same crowded names, smart investors are hunting quality where no one’s looking - and paying a fraction of the price. Check out the high-quality names we’ve flagged 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 for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today.