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 best left off your watchlist.
Two Stocks to Sell:
Mattel (MAT)
Trailing 12-Month GAAP Operating Margin: 13.8%
Known for the creation of iconic toys such as Barbie and Hotwheels, Mattel (NASDAQ: MAT) is a global children's entertainment company specializing in the design and production of consumer products.
Why Are We Cautious About MAT?
- Annual revenue growth of 1.8% over the last two years was below our standards for the consumer discretionary sector
- Demand will likely fall over the next 12 months as Wall Street expects flat revenue
- Waning returns on capital imply its previous profit engines are losing steam
Mattel’s stock price of $19.50 implies a valuation ratio of 12.2x forward P/E. Check out our free in-depth research report to learn more about why MAT doesn’t pass our bar.
Hillman (HLMN)
Trailing 12-Month GAAP Operating Margin: 5.9%
Established when Max Hillman purchased a franchise operation, Hillman (NASDAQ: HLMN) designs, manufactures, and sells industrial equipment and systems for various sectors.
Why Are We Wary of HLMN?
- Sales stagnated over the last two years and signal the need for new growth strategies
- Responsiveness to unforeseen market trends is restricted due to its substandard operating profitability
- Low returns on capital reflect management’s struggle to allocate funds effectively
At $8.06 per share, Hillman trades at 14.2x forward P/E. Dive into our free research report to see why there are better opportunities than HLMN.
One Stock to Buy:
EXL (EXLS)
Trailing 12-Month GAAP Operating Margin: 14.7%
Originally founded as an outsourcing company in 1999 before evolving into a technology-focused enterprise, EXL (NASDAQ: EXLS) provides data analytics and AI-powered digital operations solutions that help businesses transform their operations and make better decisions.
Why Will EXLS Outperform?
- Market share has increased this cycle as its 13.8% annual revenue growth over the last five years was exceptional
- Share repurchases have amplified shareholder returns as its annual earnings per share growth of 22.5% exceeded its revenue gains over the last five years
- Robust free cash flow margin of 11.5% gives it many options for capital deployment
EXL is trading at $45.36 per share, or 23.9x forward P/E. Is now the time to initiate a position? See for yourself in our in-depth research report, it’s free.
Stocks We Like Even More
Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.
While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like 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 176% over the last five years.
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.
