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 leverages its financial strength to beat the competition and two that may face some trouble.
Two Stocks to Sell:
Entegris (ENTG)
Trailing 12-Month GAAP Operating Margin: 15.5%
With fabs representing the company’s largest customer type, Entegris (NASDAQ: ENTG) supplies products that purify, protect, and generally ensure the integrity of raw materials needed for advanced semiconductor manufacturing.
Why Do We Avoid ENTG?
- Annual sales declines of 6.1% for the past two years show its products and services struggled to connect with the market during this cycle
- Demand will likely be soft over the next 12 months as Wall Street’s estimates imply tepid growth of 2.4%
- Low free cash flow margin of 9.3% declined over the last five years as its investments ramped, giving it little breathing room
At $118.17 per share, Entegris trades at 42.1x forward P/E. Read our free research report to see why you should think twice about including ENTG in your portfolio.
Allient (ALNT)
Trailing 12-Month GAAP Operating Margin: 7.6%
Founded in 1962, Allient (NASDAQ: ALNT) develops and manufactures precision and specialty-controlled motion components and systems.
Why Does ALNT Fall Short?
- Annual sales declines of 3.2% for the past two years show its products and services struggled to connect with the market during this cycle
- Issuance of new shares over the last two years caused its earnings per share to fall by 5.7% annually, even worse than its revenue declines
- Low returns on capital reflect management’s struggle to allocate funds effectively, and its decreasing returns suggest its historical profit centers are aging
Allient is trading at $60.99 per share, or 25.1x forward P/E. If you’re considering ALNT for your portfolio, see our FREE research report to learn more.
One Stock to Watch:
Apple (AAPL)
Trailing 12-Month GAAP Operating Margin: 32.4%
Creator of the iPhone and App Store, Apple (NASDAQ: AAPL) is a legendary developer of consumer electronics and software.
Why Is AAPL Interesting?
- Apple's revenue base is so large because nearly everyone in the U.S. has an iPhone, but this is a double-edged sword. Growth must now come from upgrades, a harder pitch that has resulted in sluggish top-line performance recently.
- Still, Apple's devices have endured for decades, speaking to its brand, design ethos, and technological chops. Its success is rare in the world of consumer electronics, which is fraught because of commoditization, competition, and obsolescence risk.
- The company may not have the best gross margin because of its hardware orientation, but it still manages to produce elite operating and free cash flow margins. This shows it doesn’t need over-the-top marketing campaigns to convince people to buy its products.
Apple’s stock price of $258.96 implies a valuation ratio of 29.9x forward price-to-earnings. Is now the time to initiate a position? Find out in our full research report, it’s free.
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