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.
A business making money today isn’t necessarily a winner, which is why we analyze companies across multiple dimensions at StockStory. That said, here is one profitable company that generates reliable profits without sacrificing growth and two that may face some trouble.
Two Stocks to Sell:
United Parks & Resorts (PRKS)
Trailing 12-Month GAAP Operating Margin: 23%
Parent company of SeaWorld and home of the world-famous Shamu, United Parks & Resorts (NYSE: PRKS) is a theme park chain featuring marine life, live entertainment, roller coasters, and waterparks.
Why Are We Out on PRKS?
- Sluggish trends in its visitors suggest customers aren’t adopting its solutions as quickly as the company hoped
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 11.8% for the last two years
- Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
United Parks & Resorts is trading at $36.87 per share, or 9.4x forward P/E. Dive into our free research report to see why there are better opportunities than PRKS.
Mattel (MAT)
Trailing 12-Month GAAP Operating Margin: 11.6%
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 Should You Dump MAT?
- Muted 3.3% annual revenue growth over the last five years shows its demand lagged behind its consumer discretionary peers
- Poor free cash flow margin of 11.1% for the last two years limits its freedom to invest in growth initiatives, execute share buybacks, or pay dividends
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
Mattel’s stock price of $22.17 implies a valuation ratio of 12.6x forward P/E. If you’re considering MAT for your portfolio, see our FREE research report to learn more.
One Stock to Watch:
Vicor (VICR)
Trailing 12-Month GAAP Operating Margin: 18.6%
Founded by a researcher at the Massachusetts Institute of Technology, Vicor (NASDAQ: VICR) provides electrical power conversion and delivery products for a range of industries.
Why Is VICR on Our Radar?
- 9.9% annual revenue growth over the last five years surpassed the sector average as its offerings resonated with customers
- Additional sales over the last two years increased its profitability as the 26.1% annual growth in its earnings per share outpaced its revenue
- Free cash flow margin increased by 21.8 percentage points over the last five years, giving the company more capital to invest or return to shareholders
At $136.05 per share, Vicor trades at 69.9x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
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