A company with profits isn’t always 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. Keeping that in mind, here is one profitable company that balances growth and profitability and two that may face some trouble.
Two Stocks to Sell:
Keurig Dr Pepper (KDP)
Trailing 12-Month GAAP Operating Margin: 16.9%
Born out of a 2018 merger between Keurig Green Mountain and Dr Pepper Snapple, Keurig Dr Pepper (NASDAQ:KDP) is a consumer staples powerhouse boasting a portfolio of beverages including sodas, coffees, and juices.
Why Are We Wary of KDP?
- Annual sales growth of 6.5% over the last three years lagged behind its consumer staples peers as its large revenue base made it difficult to generate incremental demand
- Costs have risen faster than its revenue over the last year, causing its operating margin to decline by 5.7 percentage points
- Underwhelming 5.7% return on capital reflects management’s difficulties in finding profitable growth opportunities
Keurig Dr Pepper is trading at $33.66 per share, or 16.3x forward P/E. Dive into our free research report to see why there are better opportunities than KDP.
MGM Resorts (MGM)
Trailing 12-Month GAAP Operating Margin: 8.3%
Operating several properties on the Las Vegas Strip, MGM Resorts (NYSE:MGM) is a global hospitality and entertainment company known for its resorts and casinos.
Why Do We Think MGM Will Underperform?
- Large revenue base makes it harder to increase sales quickly, and its annual revenue growth of 7.4% over the last five 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
- High net-debt-to-EBITDA ratio of 12× increases the risk of forced asset sales or dilutive financing if operational performance weakens
MGM Resorts’s stock price of $31.52 implies a valuation ratio of 14.1x forward P/E. To fully understand why you should be careful with MGM, check out our full research report (it’s free).
One Stock to Buy:
Robinhood (HOOD)
Trailing 12-Month GAAP Operating Margin: 38.8%
With a mission to democratize finance, Robinhood (NASDAQ:HOOD) is an online consumer finance platform known for its commission-free stock and crypto trading.
Why Will HOOD Beat the Market?
- 43.1% annual increases in its average revenue per user over the last two years show its platform is resonating with power users
- Incremental sales over the last three years have been highly profitable as its earnings per share increased by 64.6% annually, topping its revenue gains
- Free cash flow margin grew by 1,103.9 percentage points over the last few years, giving the company more chips to play with
At $65.78 per share, Robinhood trades at 30x forward EV/EBITDA. Is now a good time to buy? Find out in our full 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 183% over the last five years (as of March 31st 2025).
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 Kadant (+351% five-year return). Find your next big winner with StockStory today for free.